MWV and RockTenn agree $16bn global packaging deal


Financier Worldwide Magazine

March 2015 Issue

March 2015 Issue

In late-January 2015, after months of speculation, a $16bn global packaging deal was struck between two industry leaders: Rock-Tenn Company (RockTenn) and MeadWestvaco Corporation (MWV). According to the CEOs of both companies, the deal creates “a major global provider of consumer and corrugated packaging solutions”.

The newly combined company, to be named prior to closing, will have combined net sales of $15.7bn and adjusted EBITDA of $2.9bn. This includes the impact of $300m in estimated annual synergies over three years. Under the terms of the agreement, which has been unanimously approved by the board of directors of both companies, MWV stockholders will receive 0.78 shares of the new company for each share of MWV held. RockTenn shareholders will be entitled to elect to receive either 1.00 shares 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 division so that the ownership of the new company will be approximately 50.1 percent by MWV shareholders and 49.9 percent by RockTenn shareholders. This targeted ownership ratio of the new company will facilitate the continued favourable tax attributes of the previously announced spin-off of MWV’s specialty chemicals business, which the parties intend to complete after the closing of the business combination.

RockTenn is one of North America’s leading providers of packaging solutions and manufacturers of containerboard and paperboard. The company has 27,000 employees and operates in locations in the United States, Canada, Mexico, Chile and Argentina.

“This transaction brings together two highly complementary organisations to create a new, more powerful company with leadership positions in the global consumer and corrugated packaging markets,” said Steven C. Voorhees, chief executive of RockTenn. “This is a terrific opportunity for shareholders, employees and customers of both companies, all of whom stand to benefit enormously from the combination. 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 realise the full value of cost synergies we have identified.”

MWV is a global packaging company providing innovative solutions to the world’s most admired brands in the healthcare, beauty and personal care, food, beverage, home and garden, tobacco, and agricultural industries. The company also produces specialty chemicals for the automotive, energy and infrastructure industries and maximises the value of its development land holdings. MWV’s network of 125 facilities and 15,000 employees spans North America, South America, Europe and Asia.

“We are creating the leading global provider of consumer and corrugated packaging solutions – and generating significant value for both companies’ shareholders,” said John A. Luke, Jr., chairman and chief executive of MWV. “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.”

Blackstone Advisory Partners L.P. served as financial adviser to RockTenn throughout the transaction and provided its board of directors with a fairness opinion, as did Lazard. Furthermore, Cravath, Swaine & Moore LLP acted as RockTenn’s legal counsel. For MWV, the financial advisers were BofA Merrill Lynch and Goldman, Sachs & Co. A fairness opinion was provided to MVW’s board of directors by Greenhill. Wachtell, Lipton, Rosen & Katz acted as legal counsel.

The new company’s senior management composition will see Mr Voorhees serve as chief executive and president, while Mr Luke will become non-executive chairman of the board of directors. The board will be comprised of eight directors from RockTenn and six directors from MWV. Other key executives and their positions will be determined according to their strengths and will be named prior to closing. The new company will maintain its principal executive offices.

The RockTenn/MWV transaction requires the approval of shareholders of both companies and is subject to receipt of certain regulatory approvals and other customary closing conditions. Both parties expect to close the transaction in the second quarter of 2015.

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Fraser Tennant

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