International Paper, the world's largest paper company, announced Tuesday it will relocate its global headquarters to Memphis, Tenn., striking another blow to Connecticut's economic image.
The company expects the move from Stamford to be complete by Aug. 1, 2006. IP has about 3,000 employees in Memphis, and moved its operational headquarters there in 1987.
Last week, the Memphis and Shelby County Industrial Development Board voted to give International Paper a tax break worth $15 million to move its global headquarters from Connecticut.
"In light of the company's plan to become more focused and streamline our operations, we believe the timing is right to relocate our global headquarters to Memphis, because of the improved efficiencies that will result from having all of the company's leadership in one place," Chairman and Chief Executive Officer John Faraci said.
International Paper moved to Stamford from Purchase, N.Y., in 2001, after acquiring Stamford-based Champion International.
The move brings to Memphis 94 executive-level employees with a median income of $128,103. It will mark the company's final migration down south, where trees grow faster and the dollar goes a bit further.
"I'm very pleased to see this," said Mark Wilde, managing director with Deutsche Bank-North America in New York. "It always seemed crazy to me to have the senior management sitting in suburban New York and have the divisional people all out of Memphis, Tennessee."
The official announcement was made in Memphis on a platform set up in a parking lot of IP's existing office complex. The heavily wooded IP campus contains several buildings separated by shaded walking paths and small concrete lagoons. A small crowd of employees left their offices and gathered for the announcement.
Tennessee Gov. Phil Bredesen said attracting a Fortune 500 company will make the city and state more attractive to other corporations that might be considering moves. Ranked at 70 in the Fortune 500 list, International Paper is larger than Tennessee-based FedEx Corp. and HCA Inc.
"The headquarters will do so much for the visibility of the city. Other corporations will look at it and they'll say, 'Well, something's going on in Memphis. It's a city we should take a look at.' These things build on themselves," Bredesen said.
Faraci also spoke at the announcement, stressing the company's existing commitment to Memphis.
"We came to the conclusion that we would be a much more effective company with the leadership of the company all in one spot," Faraci said. "We were already here in Memphis. We knew the community. We've been active in the community. It's a place where our employees have wanted to relocate and it's been easy for them to do that."
Connecticut officials tried to keep IP in the state by offering incentives, but they acknowledged the $1 million to $2 million in loans paled compared to the $15 million tax break offered in Memphis.
"I understand that this is strictly a business decision, and I am disappointed they are leaving," Connecticut Gov. M. Jodi Rell said.
IP signed an economic incentive agreement five years ago that was supposed to ensure the company stayed in its Stamford headquarters until 2010. The company received a $1 million loan from the Connecticut Department of Economic and Community Development.
"We will hold them to the terms of this agreement, including all possible penalties and interest on the loan," Rell said. "A million dollars may not be significant to a multibillion company like IP, but they are backing out of a commitment they made to the State of Connecticut and to their employees."
Company officials said IP would live up to its obligations and pay a $75,000 penalty. The loan is also immediately due.
International Paper suggested last month that it might relocate its headquarters when it announced a restructuring plan that involves selling $8 billion to $10 billion in assets and closing mills.
Steven Chercover, research analyst with D.A. Davidson and Co. in Portland, Ore., said the asset sales were far more important than relocating the headquarters.
"I hope it's not a distraction to them," Chercover said.
Connecticut has the worst job stagnation in the country, with employment only slightly higher now than at the beginning of the 1990s, the Federal Deposit Insurance Corp. said in a report in June.
Last week, the Los Angeles-based Milken Institute, an economic think tank, ranked Connecticut as the fifth most expensive state in which to do business.
"It's just another source of concern as to the strength of the Connecticut economy," said Edward Deak, an economics professor at Fairfield University. "The state has been slow to recover the jobs that were lost during the downturn."