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Rock Tenn and MeadWestvaco announce 16bn merger

Article By: ,  Financial Analyst
January 26, 2015 2:26 PM

Packaging companies Rock-Tenn Co and MeadWestvaco Corp have announced they will combine to form a company worth $16 billion (£10.6 billion). The merger will create a fiercer competitor to International Paper Co., a US market leader in the industry.

MeadWestvaco shareholders will have a 50.1 per cent stake, while Rock-Tenn shareholders will hold 49.9 per cent. The deal will create a new entity, which is not named yet, with combined net sales of $15.7 billion and $300 million in yearly cost savings, the companies said today in a statement.

"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 officer of MeadWestvaco.

Shareholders' approval needed

MeadWestvaco shareholders will receive 0.78 shares of the new company for each share held. Rock-Tenn shareholders can choose to receive either one share of the new company for each share held or a cash amount equal to the average price of the company's shares during a five-day period ending before the deal's completion.

Rock-Tenn chief executive Steven Voorhees will lead the new company, while MeadWestvaco chief executive officer John Luke will become non-executive chairman.

MeadWestvaco will complete a previously announced spin-off of its chemicals business after the merger, the companies said.

The Wall Street Journal notes the deal comes as companies in the US paper industry have diversified and expanded into new regions to help counteract a slide in North American demand.

The boards of both companies backed the deal, which still needs approval from shareholders. The deal is expected to close in the second quarter of 2015.

Learn more about mergers and acquisitions at City Index.

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