MeadWestvaco Corporation announced this week that it has reached an agreement to sell its Papers business and associated assets for $2.3 billion to a new company controlled by Cerberus Capital Management, a private, New York-based investment firm.
“Immediately, the sale allows us to reduce the company’s debt, return value to shareholders and position the company for profitable growth,” said John A. Luke, Jr, chairman and chief executive officer. “It also enables us to concentrate more of our resources on capturing growth opportunities in the global packaging markets.”
Under the terms of the agreement, the new company will acquire MeadWestvaco’s Papers business, which consists primarily of mills located in Chillicothe, Ohio; Escanaba, Michigan; Luke, Maryland; Rumford, Maine; and Wickliffe, Kentucky. These mills have a combined annual capacity of approximately 2.05 million tons of coated paper, 290,000 tons of carbonless paper and 110,000 tons of uncoated paper.
The sale also includes approximately 900,000 acres of forestlands in Illinois, Kentucky, Michigan, Missouri, Ohio and Tennessee, which provide wood to these mills.
The sale is subject to customary closing conditions, including regulatory approvals and purchaser’s financing, and is expected to be completed in the second quarter of 2005.
MeadWestvaco expects the transaction to result in after-tax net proceeds of approximately $2.1 billion at closing, which it will use to improve its overall capital structure. The company expects to use approximately $900 million to $1.1 billion of the proceeds to pay off debt and between $500 million and $700 million to return value to shareholders through stock repurchases.