Via DealBook, “2 Top Package Companies to Merge”:
The merger will combine two of the biggest names in packaging, creating a company with 9.4 million tons of production capacity. It will also expand RockTenn’s business in the Midwest and West Coast. The combined company will keep RockTenn’s headquarters in Norcross, Ga.
The deal appears in some ways to be a bet that consumers will increase their buying and need for shipping products.
It also comes about two years after Smurfit-Stone filed for bankruptcy during a wave of big Chapter 11 filings. Through the bankruptcy process, the company shed billions of dollars in debt.
Under the terms of the deal, RockTenn will pay 0.30605 of its own shares and $17.50 in cash, or $35 a share at Friday’s closing price, for each Smurfit-Stone share. The price represents a 27 percent premium to Smurfit-Stone’s Friday closing price of $27.52. RockTenn will also assume $1.8 billion of Smurfit-Stone’s debt and pension liabilities.
This just goes to show that post-reorg companies can be a great opportunity. No matter how crappy they were before or that they’re still in a crappy industry, bankruptcy is inevitably a cleansing process. Upon emergence, the company has been scrubbed and scrutinized, which paves the way for outperformance in the public markets or makes the company more attractive to potential acquirers.
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