PACAKAGING and paper company RockTenn has agreed to buy bigger rival Smurfit-Stone Container for $3.5bn (£2.2bn) in cash and stock seven months after Smurfit emerged from bankruptcy with less debt and higher profit potential.
The deal will triple RockTenn’s annual revenue to more than $9bn and make the combined company the second-largest containerboard producer in North America after International Paper.
Under the merger approved by the boards of the two companies, RockTenn will pay $35 in cash and stock per each Smurfit-Stone common share, representing a 27 per cent premium to Smurfit-Stone’s closing price of $27.52 on Friday.
Smurfit-Stone chief executive Patrick J Moore (pictured) said that the transaction would achieve the company’s objective of increasing value for shareholders.
Demand for paper and packaging has risen in recent months as consumers increase spending on everyday goods that are shipped and sold using packaging, after a near decade-long slump caused by weak demand and overcapacity.
Under the terms of the deal, RockTenn is offering 50 per cent cash and 50 per cent stock for Smurfit – or $17.50 in cash and 0.30605 RockTenn shares for each Smurfit share.
RockTenn will also take on Smurfit-Stone’s net debt and pension liabilities, which amounted to $1.8bn at the end of 2010.
Following the transaction, RockTenn shareholders will own approximately 56 per cent and Smurfit-Stone shareholders will own 44 per cent of the combined company.
The deal is expected to close in the second quarter pending regulatory and shareholder approval.
City A.M. Reporter