MeadWestvaco merging with RockTenn

Richmond-based MeadWestvaco Corp. is merging with RockTenn Co. to form a packaging company with an equity value of $16 billion.

The combined company, which will have its principal executive offices in Richmond, will have combined net sales of $15.7 billion and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $2.9 billion.

The merger is expected to result in $300 million in cost savings over three years.

Steven C. Voorhees, chief executive officer of Norcross, Ga.-based RockTenn, will be CEO of the combined company, which has not yet been named.  John A. Luke, Jr., the chairman and CEO of MeadWestvaco, will become non-executive chairman of the board of directors. The board will include eight directors from RockTenn and six from MeadWestvaco.

“We are creating the leading global provider of consumer and corrugated packaging solutions – and generating significant value for both companies’ shareholders,” Luke said in a statement. “This transaction is a logical step that is borne of our strategic progress and financial success, and it offers MWV shareholders both immediate value and the opportunity to participate in significant upside as the new company generates substantial growth from its market-focused global strategy.”

The combined company’s operating offices will be in Norcross, a suburb of Atlanta.

Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, MeadWestvaco stockholders will receive 0.78 shares of the combined company for each MeadWestvaco share they have.

MeadWestvaco shareholders will have 50.1 percent ownership of the combined company with RockTenn shareholders having the remaining 49.9 percent.

“This is a terrific opportunity for shareholders, employees and customers of both companies, all of whom stand to benefit enormously from the combination,” Voorhees said in a statement. “Importantly, our two companies are also an exceptional cultural fit, sharing a commitment to exceeding customer expectations and a focus on developing innovative packaging solutions. Planning for the integration of these two companies has already started, and we expect to expeditiously realize the full value of cost synergies we have identified.”

The deal still requires the approval of shareholders of both MeadWestvaco and RockTenn, regulatory approvals and other customary closing conditions. The transaction is expected to close in second quarter of this year.

A spinoff of MeadWestvaco’s specialty chemicals division, announced in early January, will take place after the merger is completed.

MeadWestvaco announced fourth-quarter earnings including special items of $53 million or 31 cents per share, compared with $677 million, or $3.77 a share, during the same quarter the previous year. Excluding special charges, income from continuing operations was 46 cents a share, up from 29 cents a year earlier.

RockTenn’s earnings for the first quarter of its fiscal year were $125.1 million, 88 cents a share, up from $109.7 million, 75 cents a share, from the same period during the previous year. Excluding special items, earnings were 96 cents a share.

MeadWestvaco creates packaging for the health-care, beauty and personal care, food, beverage, home and garden, tobacco, and agricultural industries. It has 125 facilities and 15,000 employees in North America, South America, Europe and Asia.

RockTenn provides packaging solutions and makes containerboard and paperboard. It has 27,000 employees operating in  locations in the United States, Canada, Mexico, Chile and Argentina.