MOSCOW (MRC) -- Packaging companies Rock-Tenn Co and MeadWestvaco Corp agreed to form a combined USD16 billion company to take on market leader International Paper Co in the United States and abroad, said Reuters.
Shares of MeadWestvaco and Rock-Tenn rose to record highs. Demand for the corrugated boxes made by both companies has risen sharply as internet shopping has taken off. Worldwide e-commerce sales are expected to have risen 20 percent to USD1.5 trillion last year, according to industry data firm eMarketer.
The merger, announced by both companies on Monday, will create the second-largest U.S. packaging company behind International Paper, which has a market capitalization of nearly USD23 billion. MeadWestvaco shareholders will have a 50.1 percent stake in the new company, which will be named before the deal closes and based in Richmond, Virginia, where MeadWestvaco is headquartered.
Rock-Tenn shareholders can receive either one share of the new company for each share held or a cash amount equal to the average price of Rock-Tenn shares over a five-day period ending three trading days before the deal closes.
Though both firms primarily are paper-based packagers, a portion of the new company will keep operating in plastics packaging. MWV bought Calmar, an injection moulder, for USD710m in 2006.
Rock-Tenn and MeadWestvaco each reported better-than-expected quarterly profit on Monday. Norcross, Georgia-based Rock-Tenn's shipments of corrugated boxes rose about 11 percent in the quarter ended Dec. 31. Rock-Tenn Chief Executive Steven Voorhees will lead the new company. Luke, his counterpart at MeadWestvaco, will become non-executive chairman.
MeadWestvaco, which decided this month to spin off its chemicals business after pressure from activist investor Starboard Value LP, said the separation would be completed after the merger. The companies said the structure of the deal would help retain the "favorable tax attributes" related to this spinoff.
MRC