MeadWestvaco (MWV) and RockTenn are planning a merger that would create a $16.0-billion leader in the global packaging industry.
The combined company, to be named prior to closing, will have combined net sales of $15.7 billion and adjusted Ebitda of $2.90 billion, including the impact of $300.0 million in estimated annual synergies to be achieved over three years.
MWV, which announced earlier this month that it was planning to spin off its specialty chemicals business, says the deal has been unanimously approved by the boards of directors of both companies.
Under the terms of the agreement, MWV stockholders will receive 0.78 share of the new company for each share of MWV held. RockTenn shareholders will be entitled to elect to receive either 1.00 share of the new company or cash in an amount equal to the volume weighted average price of RockTenn common stock during a five-day period ending three trading days prior to closing for each share of RockTenn held. The cash and stock elections by RockTenn shareholders will be subject to proration such that the resulting ownership of NewCo will be approximately 50.1% by MWV shareholders and 49.9% by RockTenn shareholders, and based on the shares outstanding today, approximately 7.0% of RockTenn shares will receive cash in lieu of stock. This targeted ownership ratio of the new company will facilitate the continued favorable tax attributes of the spin-off of MWV’s specialty chemicals business, which the parties intend to complete after closing the business combination.
Separately, MWV reports that its specialty chemicals sales were up 3.0% year-on-year, to $241.0 million, while segment Ebitda rose 2.0%, to $62.0 million. Carbon technologies sales increased 15%, led by automotive solutions. The company also reports 18% revenue growth in asphalt from share gains with Evotherm warm mix paving solution and 22% revenue growth in oilfield from share gains with higher-value, high-performance formulations. Standard pine chemical revenue declined modestly.
“MWV’s revenue and earnings growth this quarter was the result of momentum we generated throughout a very good year of performance in 2014,” says John Luke, chairman and CEO of MWV. “Our strong packaging and specialty chemicals results reinforce the benefits of the market-focused strategies we have established in each business. We are confident our packaging and specialty chemicals businesses will continue to be successful and contribute to long-term shareholder value creation as new companies.”
By Rebecca Coons