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January 26, 2015 01:00 AM

Major packaging merger includes plastics operations

Jim Johnson
Senior Reporter
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    A merger of packaging companies MeadWestvaco Corp. and Rock-Tenn Inc. will create a new company with nearly $16 billion in annual sales.

    While the vast majority of that revenue will come from paper-based packaging, there's still a chunk of the newly combined company operating in the plastics packaging sector.

    MeadWestvaco Calmar Inc. is an injection molder based in Grandview, Mo., that the company acquired in 2006 for $710 million. The subsidiary makes pump and spray packaging systems.

    MeadWestvaco later acquired Keltec Dispensing Systems of Drunen, the Netherlands, which became part of MeadWestvaco Calmar.

    And it was three years ago that MeadWestvaco acquired Polytop Corp. of Slatersville, R.I., a maker of dispensing closures in the food, home and garden, and beauty and personal care markets.

    Rock-Tenn, meanwhile, has an extensive recycling division with a couple of dozen locations. The company handles 8 million tons of materials annually, mainly paper-based products, but still had its hand in plastics recycling.

    The company's most recent sustainability report indicated Rock-Tenn collects and recycles 270,000 tons of plastic recyclables and other nonfiber materials each year.

    News of the merger on Jan. 26 continues what has been a 2015 makeover for MeadWestvaco, which earlier this month announced plans to spin off its specialty chemicals business into a separate company. The company also agreed to sell its tobacco folding carton business in Europe just last week.

    Merging the new companies will create a new firm that's yet to be named, with 50.1 percent of the shares held by current MeadWestvaco stockholders and 49.9 percent by Rock-Tenn stockholders.

    “This is a terrific opportunity for shareholders, employees and customers of both companies, all of whom stand to benefit enormously from the combination,” said Rock-Tenn CEO Steven Voorhees in a statement.

    Voorhees will become CEO of the new company and current MeadWestvaco CEO John A. Luke Jr., will become chairman. The new company's board will have eight directors from Rock-Tenn and six from MeadWestvaco.

    Executive offices for the new firm will be in Richmond, Va., and operating offices will be in Norcross, Ga.

    Both sides expect the deal, which must be approved by shareholders of both companies, to be completed during the second quarter.

    Combining the companies is expected to yield $300 million in annual savings by after three years, the companies said.

    A research note from Christopher Manuel, a senior analyst with Wells Fargo Securities, views the deal “as attractive from both a strategic and financial perspective.” He also indicates the $300 million in savings “looks conservative.”

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