The new company, which had not been named as of Monday, will have combined sales of $15.7 billion and its board will include eight directors from Rock-Tenn and six directors from MeadWestvaco. Within three years, the deal is expected to result in annual cost savings of $300 million, though officials did not say if the savings would include job cuts at any of its locations around the world.
Over the last several years, MeadWestvaco has gone from a mill-centric paper supplier to a global packaging maker for brands like Procter & Gamble, Coca-Cola and Wal-Mart. This month, the company announced plans to spin off its specialty chemicals business and the sale of its European-based tobacco folding carton business — both which will move forward as planned. In late 2013, MeadWestvaco sold its U.S. forestland holdings.
Under the terms of the deal that's expected to close in the second quarter, MeadWestvaco Corp. stockholders will receive 0.78 shares of the combined company for each share they own. Rock-Tenn shareholders will be allowed to choose either 1 share of the combined company or a specific cash amount for each Rock-Tenn Co. share held.
Rock-Tenn CEO Steven Voorhees will become CEO and John Luke, Jr., chairman and CEO of MeadWestvaco, will become non-executive chairman. The company will have its principal executive offices in Richmond, Virginia, where MeadWestvaco is based. It will have operating offices in Norcross, Georgia, where Rock-Tenn is based.
The boards of both companies approved the deal, but it still requires a nod from shareholders, as well as antitrust regulators.
In a conference call with investors, the executives said the combination "makes tremendous sense" because of the companies' complementary products and markets.
Rock-Tenn has 27,000 employees with locations in the U.S., Canada, Mexico, Chile and Argentina. MeadWestvaco has 15,000 workers at 125 locations throughout North America, South America, Europe and Asia.
After hitting all-time highs late last week, shares of both companies rose higher in morning trading Monday as their quarterly earnings beat Wall Street expectations along with the announced merger.
Rock-Tenn posted first-quarter net income of $125.1 million and revenue of $2.51 billion. MeadWestvaco earned $53 million and recorded revenue of $1.37 billion for its fourth quarter.
For the year, MeadWestvaco reported profit of $263 million, or $1.53 per share. Revenue was reported as $5.63 billion.
AP Business Writer Michelle Chapman in New York contributed to this report.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .