MeadWestvaco Outlines Plan for Rock-Tenn Merge

Zacks

MeadWestvaco Corporation MWV and Rock-Tenn Company RKT have declared the executive leadership team for the combined company which will be formed after the merger of these two packaging giants. This team will execute core strategies and help generate substantial shareholder value.

On Jan 26, Rock-Tenn and MeadWestvaco had entered into a definitive merger agreement. This is touted to be one of the major deals in the paper packaging industry as it will create the second-largest U.S. packaging company worth $16 billion, trailing only International Paper Company IP, which has a market capitalization of nearly $23 billion.

Bob Beckler, the current executive vice president of MeadWestvaco and president of packaging, will become the president of Packaging Solutions of the new company. Meanwhile, MeadWestvaco’s Pete Durette and Linda Schreiner will serve as chief strategy officer and chief integration officer, respectively, of the combined company.

On the other hand, Ward Dickson, the current executive vice president and chief financial officer (“CFO”) of Rock-Tenn, will become the CFO of the new company per the executive leadership team strategy. Nina Butler and Jennifer Graham-Johnson will work as chief sustainability officer and chief human resources officer, respectively. Bob McIntosh, the present executive vice president, general counsel and secretary of Rock-Tenn will act as general counsel of the merged company.

As previously announced, Voorhees, the current chief executive officer (“CEO”) of Rock-Tenn will serve as CEO and president of the combined company, and Luke, the junior chairman and CEO of MeadWestvaco will become non-executive chairman of the board. Ed Rose, president, Specialty Chemicals, and Ken Seeger, president, Community Development and Land Management, will continue in their current leadership roles, and report to Voorhees.

The transaction remains on track to close in the second quarter of 2015. The merger is still subject to other customary closing conditions, including receipt of stockholder and shareholder approvals, as applicable, as well as other regulatory approvals.

The combined company is expected to generate net sales of $15.7 billion and adjusted EBITDA of $2.9 billion. This includes the impact of $300 million in estimated annual synergies, to be achieved over three years.

However, the deal has its inherent risks. Failure to complete the merger could adversely affect MeadWestvaco’s business and its share price. The company will also continue to incur significant costs, expenses and fees for professional services and other transaction costs in connection with the merger.

Additionally, MeadWestvaco will be subject to business uncertainties and contractual restrictions while the transaction is pending. The combination agreement restricts both the companies from making particular acquisitions and expenditures, entering into certain contracts, and taking other specified actions without the consent of the other party until the merger occurs. These restrictions may prevent MeadWestvaco from pursuing attractive business opportunities that can arise prior to the completion of the merger.

MeadWestvaco currently carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in this sector that warrants a look is Berry Plastics Group, Inc. BERY, which sports a Zacks Rank #1 (Strong Buy).

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