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International Paper, Ilim Complete Formation of 50:50 Joint Venture
Memphis, Tennessee, USA, and St. Petersburg, Russia, 05 October 2007 -- /PRNewswire/ -- International Paper (NYSE: IP) and Ilim Holding S.A. have completed the previously announced formation of a 50:50 joint venture, the largest foreign- domestic alliance in the Russian forest sector. The joint venture will operate as Ilim Group (Ilim).

To form the joint venture, International Paper purchased 50% of Ilim Holding, S.A., for approximately USD 620 million. The deal received approval from the Russian Federal Antimonopoly Service in June and the partners signed a definitive agreement for the deal in August.

"The formation of this 50:50 joint venture is a real strategic milestone for International Paper," said John Faraci, International Paper chairman and chief executive officer. "Both parties bring important strengths and expertise to the JV, and we are very positive about the future success of this new partnership," he said.

"We are very pleased to begin our partnership with Ilim and work together to continue to grow this business," said Mary Laschinger, International Paper senior vice president and president of IP Europe. "We believe the joint venture has all the ingredients needed for success: good management, talented, hard-working employees, a solid asset base with improvement potential, and strong supply positions in high-growth markets."

Chairman of Ilim Group Zakhar Smushkin said, "Today we are opening a new page in the history of Ilim Group and the entire Russian pulp and paper industry. We have formed an alliance that is unprecedented in our sector and will become the center of dynamic growth of the entire Russian forest products industry. This is a response to global market challenges and the appeals from the Russian president and the government of the Russian Federation. The company's products will be able to meet the demand of the growing Russian market for high-quality paper and packaging products and also resolve the import replacement problem. In five years' time, every fourth sheet of paper and every third corrugated box in the Russian market will be produced by our company."

A key element of the joint venture strategy is a long-term investment program in which the joint venture will invest, through cash from operations and additional debt, approximately USD 1.5 billion in Ilim's four mills over approximately five years. This unprecedented investment in the Russian pulp and paper industry will upgrade equipment, increase production capacity, and allow for new high-value uncoated paper, pulp, and corrugated packaging product development.

The pulp and paper mill that International Paper currently owns and operates in Svetogorsk, in Russia's Leningrad region, will not be owned by the joint venture and will continue to operate as part of IP's European Papers business. Similarly, Ilim Pulp's wood products enterprises will not be integrated into the joint venture; instead they will be combined to create Russia's largest wood products holding company.

Board of Directors and Management Team

The joint venture has formed a new board of directors which includes four members each from Ilim and International Paper. Board members from International Paper are: Mary Laschinger, senior vice president and president, IP Europe; Cato Ealy, senior vice president, corporate development; Richard Phillips, retired senior vice president, technology; Dwight Van Inwegen, chief financial officer, IP Europe. Ilim is represented by the current Ilim Pulp shareholders, Boris Zingarevich, Mikhail Zingarevich, and Leonid Erukhimovich, as well as Zakhar Smushkin, who will also chair the board of directors.

About International Paper

International Paper (NYSE: IP), founded in 1898, is a global uncoated paper and packaging company with primary markets and manufacturing operations in North America, Europe, Russia, Latin America, Asia, and North Africa. Its uncoated papers and packaging businesses are complemented by xpedx, North America's largest distributor of printing papers and graphics supplies and equipment. Headquartered in the United States, International Paper employs approximately 54,000 people in more than 20 countries, and serves customers worldwide. Annual sales are about USD 22 billion. International Paper partners with customers and environmental, academic, civic and governmental organizations, as well as landowners and harvesting professionals, to encourage responsible forest stewardship, improve the health and productivity of forestlands, and increase recovery of our recyclable products. The company has a long-standing policy of using no wood from endangered forests. To learn more about International Paper, its products and commitment to economic, social, and environmental sustainability, visit www.internationalpaper.com.

About Ilim Group

Ilim Group was registered in St. Petersburg on 27 September 2006. In 2007, the Group was joined by Kotlas Pulp and Paper Mill, Bratsk Pulp and Containerboard Mill and Ust-Ilimsk Pulp and Paper Mill as the mills were converted to a single share. On 02 July, Ilim Group started its activities as a unified company. Production assets of the Group are structured on the production and geographical basis and include business units "Ilim West" (North-Western Pulp and Paper Production), "Ilim East" (Siberian Pulp and Paper Production), and Corrugated Packaging. Business unit Ilim West includes Koryazhma Branch of Ilim Group (Arkhangelsk region), as well as timber suppliers, regional service companies in Arkhangelsk region and St. Petersburg Cartonboard and Printing Mill (Leningrad region), its distributor PetroBoardTrading, and Alt Papier. Business unit Ilim East includes Bratsk and Ust-Ilimsk Branches of Ilim Group, as well as regional logging companies and service companies. Corrugated Packaging business unit includes corrugated plant Ilim Gofropak and Ilim Gofra, whose aim is to implement the Group's projects to establish new corrugated board plants.The company also includes centralized service providers to the Group's branches and subsidiaries. To learn more, visit http://www.ilimgroup.com

Source: International Paper

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