RockTenn to acquire Smurfit-Stone

RockTenn and Smurfit-Stone Container Corporation announced that the boards of directors of both companies have approved a definitive agreement under which Smurfit-Stone will become a wholly-owned subsidiary of RockTenn.

The aggregate consideration, consisting of 50 percent cash and 50 percent RockTenn stock, is valued at $35 per share of Smurfit-Stone common stock, and represents a 27 percent premium to Smurfit-Stone’s closing stock price on January 21, 2011. The aggregate equity value of the transaction, based on the closing price of RockTenn’s common stock on January 21, 2011, is approximately $3.5 billion.

This transaction, unanimously approved by the boards of directors of both companies, will create a $9 billion leader in the North American paperboard packaging market. Upon closing, RockTenn will maintain its headquarters in Norcross, Georgia.

Smurfit-Stone has manufacturing mill capacity of 7.0 million tons, and when combined, RockTenn will have 9.4 million tons of total production capacity, including 7.5 million tons of mill production in the attractive containerboard market.

Smurfit-Stone will become a wholly owned subsidiary of RockTenn. For each share of Smurfit-Stone common stock, Smurfit-Stone stockholders will be entitled to receive 0.30605 shares of RockTenn common stock and $17.50 in cash, representing 50 percent cash and 50 percent stock. The aggregate consideration is $35 per Smurfit-Stone common share. The consideration represents a 27 percent premium to Smurfit-Stone’s closing stock price on January 21, 2011.

The aggregate purchase price being paid for Smurfit-Stone’s equity in the transaction is approximately $3.5 billion, consisting of approximately $1.8 billion of cash and the issuance of 30.9 million shares of RockTenn common stock. Following the acquisition, RockTenn shareholders will own approximately 56 percent and Smurfit-Stone shareholders will own 44 percent of the combined company.

In addition to the equity consideration, RockTenn will assume Smurfit-Stone’s net debt and pension liabilities. As of December 31, 2010 Smurfit-Stone’s net debt was $0.7 billion and its pension liabilities were $1.1 billion ($0.7 billion after-tax). RockTenn has received $3.7 billion in committed bank financing from Wells Fargo Bank N.A., Rabobank and SunTrust Bank to finance the cash portion of the transaction, to refinance existing debt and to provide liquidity for the combined operations.

The purchase price, including Smurfit-Stone’s net debt and after-tax pension liability as of December 31, 2010, represents a multiple of 6.1x Smurfit-Stone’s annualized adjusted EBITDA of $820 million for the three months ended December 31, 2010.

The transaction is expected to close in the second calendar quarter of 2011 and is subject to customary closing conditions, regulatory approvals, as well as approval by both RockTenn and Smurfit-Stone stockholders.