Log In | Register
NORCROSS — Packaging manufacturer Rock-Tenn Co. is buying competitor Smurfit-Stone Container Corp. for $3.5 billion in cash and stock, the companies announced Sunday.
The combined company will have annual sales of more than $9 billion, they said, making it one of the largest North American paperboard companies.
The deal values Smurfit-Stone's common shares at $35, a 27 percent premium over Friday's closing price of $27.52.
Both companies' boards agreed to the half-stock, half-cash deal. Rock-Tenn, based in Norcross, Ga., will pay 0.30605 share of its own stock, plus $17.50 in cash, for each share of Smurfit-Stone.
After the deal, Rock-Tenn's current shareholders will own about 56 percent of the combined company's shares. Smurfit-Stone's current shareholders will own the remaining 44 percent.
Smurfit-Stone, based in Chicago, emerged from Chapter 11 bankruptcy protection in June after 17 months. It sought relief in January 2009 after struggling to restructure heavy debts amid a recession that weakened demand for packaging.
Economists see demand for cardboard as a proxy for economic activity. Higher cardboard sales typically indicate that more products are being manufactured and shipped to consumers.
By that logic, Rock-Tenn's deal to absorb Smurfit-Stone amounts to a bet that the economic recovery will continue to gain strength
Rock-Tenn will assume $700 million in debt and $1.1 billion in pension liabilities from Smurfit-Stone as part of the deal.
The deal is expected to close in the second quarter of 2011. It still must be approved by shareholders of both companies and by regulators.
