MeadWestvaco will be looking in the future for packaging acquisitions. The industry I've worked in for over 23 years. My best area of knowledge of any industries I know.
MeadWestvaco in $2.3 Bln Paper Unit Sale
Tuesday January 18, 11:08 am ET
NEW YORK (Reuters) - Paper and packaging maker MeadWestvaco Corp. (NYSE:MWV - News) said on Tuesday it has agreed to sell its paper business and associated assets for $2.3 billion to cut debt and focus on expanding its packaging business.
The company, whose shares rose 2.3 percent in early trading, said the deal to sell its paper unit to a new company controlled by Cerberus Capital Management LP, a private New York-based investment firm, should be completed in the second quarter of 2005.
After the transaction, Stamford, Connecticut-based MeadWestvaco will have more than $6 billion in annual revenue, with about three-quarters of that revenue coming from its packaging business and one-third from international sources.
The paper business, which has about $2.3 billion in annual sales, includes a handful of paper mills located in the eastern half of the United States and 900,000 acres of forest that provide wood for the mills.
Cerberus, which has invested in everything from airlines to fast food and manages more than $14 billion in capital, will keep the paper business' current management team intact. The new company will be based in Dayton, Ohio.
After shedding the paper operations, MeadWestvaco said it will work to expand its packaging business in higher-growth markets in Asia, Eastern Europe and Latin America.
The company had worked in recent years to shed costs and gain market share at the papers business, a process it said would position the unit well as a stand-alone entity.
MeadWestvaco expected the deal to result in after-tax net proceeds of about $2.1 billion. It said it will use up to $1.1 billion to pay down debt and between $500 million and $700 million on stock repurchases.
The company said the remaining cash will be available either for strategic growth opportunities or to further pay down debt and return value to shareholders.
MeadWestvaco also said it would take a one-time accounting loss of $650 million to $675 million as part of the sale, and planned to record most of that loss in the fourth quarter.
Shares of MeadWestvaco rose 77 cents to $33.68 on the New York Stock Exchange on Tuesday morning.
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