MeadWestvaco Agrees to Sell Papers Assets for $2.3 Billion
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 down debt and between $500 million and $700 million to return value to shareholders through stock repurchases. At the completion of the capital restructuring, the company expects its debt to capital ratio to be 40 percent or better. The remaining cash will be available either for strategic growth opportunities or to further pay down debt and return value to shareholders.
MeadWestvaco estimates that the transaction will result in a one-time after-tax accounting loss of between $650 and $675 million, the majority of which will be recorded in the fourth quarter of 2004. In addition, the Papers business operating results will be reported as discontinued operations in MeadWestvaco's consolidated financial statements beginning in the first quarter of 2005. The Papers business has approximately $2.3 billion in annual sales.
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, Mich., Luke, Md., Rumford, Maine and Wickliffe, Ky. 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. After the sale of the Papers business, MeadWestvaco will own approximately 1.2 million acres of forestland.
The acquiring company will be privately held and headquartered in Dayton, Ohio, with the current Papers management team continuing to lead the business. Peter H. Vogel Jr., current president of MeadWestvaco's Papers Group, will become chief executive officer of the new company. Approximately 6,300 employees of the Papers business are expected to join the new company, including corporate staff who have been exclusively dedicated to supporting that business.