Mosinee, Wis.-based Wausau Paper Corp. plans to sell its specialty paper business, including its Rhinelander and Mosinee paper mills, to a new company controlled by private equity firm KPS Capital Partners, LP., Wausau announced Thursday.

Wausau signed a non-binding letter of intent to make the sale. Meanwhile, KPS has signed a similar letter of intent with a third party, aiming to buy its business through the same company that is buying Wausau’s specialty paper business. The two businesses will then be combined into one within the new company and, according to the terms of the LOI, Wausau will, at that time, have the option of taking a 25% interest in the new company — potentially earning an additional 5% stake over time if the specialty paper business meets certain performance thresholds.

KPS will pay Wausau $130 million for its specialty paper business; however, the transaction does not include assumption of pension and other retiree benefit liabilities attached to the business. These remain with Wausau.

The parties are targeting a Q2 2013 closing date for this transaction. Among other conditions, however, this transaction is contingent on the unnamed third party also agreeing to sell its business to KPS.

Wausau shares closed 2.5% lower ahead of the announcement, ending at $10.31.

The article Wausau Aims to Sell Specialty Paper Biz originally appeared on Fool.com.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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