NEW YORK (MarketWatch) — Less than a year out of bankruptcy, a streamlined Smurfit-Stone Container Group Corp. said it would be acquired by RockTenn Co. for about $3.5 billion, creating North America’s second-largest provider of container-board packaging. “The business really is going to perform closely to GDP, which means it will grow and be much more stable,” said RockTenn Chairman and Chief Executive James Rubright, on a call with analysts.
Combining RockTenn and Smurfit-Stone bumps market share among the top five producers to 74% from 72%, according to data provided by Credit Suisse.
Norcross, Ga.-based RockTenn said the deal with Smurfit-Stone is expected to close in the second quarter and add to earnings by fiscal 2012, which begins in September.
Annual sales, which include revenue from consumer packaging, merchandising displays and specialty paperboard products, are expected to exceed $9 billion.
“We see RockTenn earning about $8.75 per share in fiscal 2012, 33% above our current estimate of $6.60,” said Credit Suisse in a research note to clients. “In fiscal 2013, which represents a less-robust, more ‘normalized’ year in our container-board forecast, we see about 5% accretion, which would allow RockTenn to earn about $6.70 per share versus our $6.40 estimate, based on 50% of planned synergies.”
Before the deal’s announcement, Credit Suisse had an overweight rating and a $72 price target on RockTenn’s stock.
RockTenn estimated that it will find about $150 million in synergies within two years after the transaction closes.
RockTenn plans to pay for the transaction with 50% cash and 50% stock, resulting in Smurfit-Stone shareholders owning about 44% of the new company. RockTenn will also assume $700 million of net debt and $1.1 billion of pension liabilities in the deal.
Smurfit-Stone brings with it a diverse customer base and reduced exposure to the recycled container-board side of the business, which has been under pressure over the past 10 years as China raised its capacity.
“The container-board and corrugated packaging industry is a very good business and U.S. virgin container-board is a highly strategic global asset,” said CEO Rubright. “With this acquisition, RockTenn’s fiber input ratio will be 55% virgin and 45% recycled.”
Wells Fargo Securities acted as exclusive financial adviser to RockTenn, with King & Spalding LLP serving as legal counsel.
Smurfit-Stone’s financial adviser was Lazard Ltd., and its legal adviser was Wachtell Lipton Rosen & Katz.
U.S. stocks begin the week higher
Stocks move higher amid a flood of earnings reports expected this week, and currencies and rates fluctuate after the Russian airport bombing.Combining RockTenn and Smurfit-Stone bumps market share among the top five producers to 74% from 72%, according to data provided by Credit Suisse.
Norcross, Ga.-based RockTenn said the deal with Smurfit-Stone is expected to close in the second quarter and add to earnings by fiscal 2012, which begins in September.
Annual sales, which include revenue from consumer packaging, merchandising displays and specialty paperboard products, are expected to exceed $9 billion.
“We see RockTenn earning about $8.75 per share in fiscal 2012, 33% above our current estimate of $6.60,” said Credit Suisse in a research note to clients. “In fiscal 2013, which represents a less-robust, more ‘normalized’ year in our container-board forecast, we see about 5% accretion, which would allow RockTenn to earn about $6.70 per share versus our $6.40 estimate, based on 50% of planned synergies.”
Before the deal’s announcement, Credit Suisse had an overweight rating and a $72 price target on RockTenn’s stock.
RockTenn estimated that it will find about $150 million in synergies within two years after the transaction closes.
RockTenn plans to pay for the transaction with 50% cash and 50% stock, resulting in Smurfit-Stone shareholders owning about 44% of the new company. RockTenn will also assume $700 million of net debt and $1.1 billion of pension liabilities in the deal.
Smurfit-Stone brings with it a diverse customer base and reduced exposure to the recycled container-board side of the business, which has been under pressure over the past 10 years as China raised its capacity.
“The container-board and corrugated packaging industry is a very good business and U.S. virgin container-board is a highly strategic global asset,” said CEO Rubright. “With this acquisition, RockTenn’s fiber input ratio will be 55% virgin and 45% recycled.”
Wells Fargo Securities acted as exclusive financial adviser to RockTenn, with King & Spalding LLP serving as legal counsel.
Smurfit-Stone’s financial adviser was Lazard Ltd., and its legal adviser was Wachtell Lipton Rosen & Katz.
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