Under the terms of the agreement, shareholders of MeadWestvaco will each receive 0.78 shares in the new company for each share of MeadWestvaco stock they hold. Rock-Tenn’s shareholders may choose to receive one new share for each share they hold or a cash payment equal to the volume weighted average price of Rock-Tenn common stock during a five-day period ending three trading days prior to closing for each share of Rock-Tenn held, subject to proration with the result that MeadWestvaco shareholders will own 50.1% of the new company and Rock-Tenn shareholders will own 49.9%. On that basis, about 7% of Rock-Tenn shares will get cash instead of stock.
Steven Voorhees, current CEO of Rock-Tenn, will be the CEO and president of the new company and John Luke Jr., currently chairman and CEO of MeadWestvaco, will become non-executive chairman. A 14-member board of directors will include eight directors from Rock-Tenn and six from MeadWestvaco. The new company will maintain its principal executive offices in Richmond, Va., current home of MeadWestvaco.
The deal requires approval of shareholders of both companies and is expected to be completed in the second quarter of this year.
In 2011, Rock-Tenn acquired Smurfit-Stone Container for $3.5 billion and became North America’s second-largest producer of containerboard. International Paper Co. (NYSE: IP) is the largest North American paper-products maker with a market cap of around $22.9 billion. Rock-Tenn has been an aggressive acquirer through its history and invested more than $416 million on mergers and acquisition in 2014.