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| MeadWestvaco
Agrees to Sell Papers Assets for $2.3 Billion |
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Proceeds
to Be Used to Improve Capital Structure
Company to Focus on Profitable Growth Opportunities in Global
Packaging |
Stamford,
Conn., January 18, 2005 – MeadWestvaco Corporation
(NYSE: MWV) today announced that it has reached a
definitive agreement to sell its Papers business and
associated assets for $2.3 billion to a new company
controlled by Cerberus Capital Management L.P., a
private, New York-based investment firm.
“This transaction marks an important strategic step
for MeadWestvaco,” said John A. Luke, Jr., chairman
and chief executive officer. “It makes us a more
focused company, able to deliver stronger, more
consistent financial returns. Immediately, the sale
allows us to reduce the company’s debt, return value
to shareholders and position the company for
profitable growth. It also enables us to concentrate
more of our resources on capturing growth
opportunities in the global packaging markets.
“This sale monetizes the value of our efforts to
create the leading Coated Papers franchise in North
America,” Mr. Luke continued. “Over the last
several years, we have reduced costs and gained market
share in a challenging economic environment, and this
sale creates a new Papers business that is well
positioned to compete as a stand-alone company.”
After the closing, MeadWestvaco will have more than
$6.0 billion in annual revenues, with about
three-quarters coming from the packaging business and
about one-third coming from international sources, and
approximately 24,000 employees. The company will focus
on expanding its higher margin packaging business
geographically by leveraging its strong positions in
North America and Europe to penetrate growth markets
in Asia, Eastern Europe and Latin America.
Additionally, the company will continue to benefit
from strong market positions in Consumer and Office
Products, Specialty Chemicals and Specialty Papers.
The sale is subject to customary closing conditions,
including regulatory approvals and purchaser’s
financing, and is expected to be completed in the
second quarter of 2005.
MeadWestvaco expects the transaction to result in
after-tax net proceeds of approximately $2.1 billion
at closing, which it will use to improve its overall
capital structure. The company expects to use
approximately $900 million to $1.1 billion of the
proceeds to pay down debt and between $500 million and
$700 million to return value to shareholders through
stock repurchases. At the completion of the capital
restructuring, the company expects its debt to capital
ratio to be 40 percent or better. The remaining cash
will be available either for strategic growth
opportunities or to further pay down debt and return
value to shareholders.
MeadWestvaco estimates that the transaction will
result in a one-time after-tax accounting loss of
between $650 and $675 million, the majority of which
will be recorded in the fourth quarter of 2004. In
addition, the Papers business operating results will
be reported as discontinued operations in
MeadWestvaco’s consolidated financial statements
beginning in the first quarter of 2005. The Papers
business has approximately $2.3 billion in annual
sales.
Under the terms of the agreement, the new company will
acquire MeadWestvaco’s Papers business, which
consists primarily of mills located in Chillicothe,
Ohio; Escanaba, Michigan; Luke, Maryland; Rumford,
Maine; and Wickliffe, Kentucky. These mills have a
combined annual capacity of approximately 2.05 million
tons of coated paper, 290,000 tons of carbonless paper
and 110,000 tons of uncoated paper.
The sale also includes approximately 900,000 acres of
forestlands in Illinois, Kentucky, Michigan, Missouri,
Ohio and Tennessee, which provide wood to these mills.
After the sale of the Papers business, MeadWestvaco
will own approximately 1.2 million acres of forestland.
The acquiring company will be privately held and
headquartered in Dayton, Ohio, with the current Papers
management team continuing to lead the business. Peter
H. Vogel, Jr., current president of MeadWestvaco’s
Papers Group, will become chief executive officer of
the new company. Approximately 6,300 employees of the
Papers business are expected to join the new company,
including corporate staff who have been exclusively
dedicated to supporting that business.
“Separation from MeadWestvaco gives the Papers
business a tremendous opportunity to build on our
leading position with customers in the marketplace,”
said Mr. Vogel. “In Cerberus, we have a strong
financial partner committed to the business. We have
an outstanding group of employees, who together have a
great opportunity to make us successful.”
Goldman, Sachs & Co. and UBS Investment Bank are
acting as financial advisors to MeadWestvaco.
Greenhill & Co. LLC provided the board of
directors of MeadWestvaco with a fairness opinion.
MeadWestvaco was represented by the law firm of
Wachtell, Lipton, Rosen & Katz.
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