NOVEMBER 2011

KapStone Paper to acquire U.S. Corrugated

KapStone Paper and Packaging Corporation has announced that it has signed an agreement to acquire the stock of U.S. Corrugated, Inc. (USC) for $330 million in cash and subject to certain post-closing adjustments. Closing of the acquisition is subject to a number of customary conditions, including regulatory review and receipt of financing.

USC operates a 240,000 ton recycled containerboard paper mill in Cowpens, South Carolina and 20 converting facilities in the eastern and mid-western United States. Six of such operating facilities will be disposed of by USC prior to the closing. Those facilities will remain under the management and control of Dennis Mehiel, chairman of the board and current majority stockholder of U.S. Corrugated. In 2010, the operations to be acquired from USC generated $423 million in net sales.

Chairman and chief executive officer, Roger W. Stone, stated, “This acquisition will increase our exposure to the highly desirable containerboard segment. Also, we believe that because USC is a net purchaser of 195,000 tons of containerboard that the risk of costly economic downtime will be mitigated throughout the economic cycle.

Stone concluded, “Strategically, the acquisition of USC transforms KapStone into a much more profitable and stronger company providing additional momentum for KapStone to continue its record of excellence for increasing value to our shareholders.”

KapStone has committed financing from Bank of America, N.A. and Barclays Capital for a $525 million senior secured credit facility. The new credit facility is expected to consist of a $150 million revolving credit facility and a $375 million term loan maturing over five years. At closing, a portion of the proceeds will be used to pay off KapStone’s existing $101 million term loan.