MeadWestvaco Corp has agreed to merge with rival US packaging company Rock-Tenn in a deal valued at about $8.4 billion to create the world’s second-largest packaging company.
The cash-and-stock transaction will give shareholders of Richmond, Virginia-based MeadWestvaco 50.1 per cent of the new company and investors in Rock-Tenn will hold the rest, the companies said Monday in a joint statement.
MeadWestvaco outlined plans earlier this month to spin off its specialty-chemical business following criticism of its “conglomerate structure” from activist investor Starboard Value LP. That transaction will still proceed after the merger with Rock-Tenn, both manufacturers said.
The deal announced Monday, the largest in the paper industry in a decade, is forecast to cut $300 million of costs annually. The new company will have 42,000 employees in 30 countries across the Americas, Europe and Asia. The combination will create extra financial flexibility, MeadWestvaco and Norcross, Georgia-based Rock-Tenn said in a slide presentation.
“We are creating the leading global provider of consumer and corrugated packaging solutions,” MeadWestvaco Chairman and Chief Executive Officer John A. Luke Jr. said in the statement.
Steve Voorhees, Rock-Tenn’s CEO, will lead the new company, which will be based in Richmond and have estimated annual earnings before interest, taxes, depreciation and amortization of $2.9 billion on sales of $15.7 billion.
MeadWestvaco holders will get 0.78 of a share of the newly combined company for each share held. Rock-Tenn shareholders have a choice of receiving either 1 share per current share held or cash equal to the five-day volume-weighted average price of the current company’s stock three days before the deal’s completion.
Blackstone Advisory Partners was financial adviser to Rock-Tenn, while Cravath, Swaine & Moore LLP acted as legal counsel. MeadWestvaco’s financial advisers were Bank of America Merrill Lynch and Goldman Sachs Group Inc. Wachtell, Lipton, Rosen & Katz was MeadWestvaco’s legal counsel. Greenhill & Co provided a fairness opinion to MeadWestvaco’s board.
The transaction is the largest in the paper industry since Koch Industries Inc acquired Georgia-Pacific LLC in 2005 for about $12.6 billion, according to data compiled by Bloomberg.
International Paper Co is the biggest packaging company by sales, according to the slide presentation from Rock-Tenn and MeadWestvaco.
Bloomberg News edited by ESM
