Rock-Tenn Co. agreed to acquire U.S. rival MeadWestvaco Corp. in a deal valued at about $9.2 billion to create the world's second-largest packaging company.
The cash-and-stock transaction will give shareholders of MeadWestvaco 50.1% of the new company and investors in Rock-Tenn will hold the rest, the companies said Monday in a joint statement.
The deal, the largest in the paper industry in a decade, comes seven months after activist investor Starboard Value said it took a stake in MeadWestvaco. Starboard criticized the Richmond, Va., company for what it described as a conglomerate structure and urged it to find ways to improve its performance. MeadWestvaco outlined plans this month to spin off its specialty-chemical unit, a transaction that will still proceed.
The combination of Norcross, Ga.-based Rock-Tenn and MeadWestvaco is forecast to cut $300 million of costs annually. The new company, which will be based in Richmond, will have 42,000 employees in 30 countries across the Americas, Europe and Asia.
The combination will create extra financial flexibility, the companies said. It will also take advantage of MeadWestvaco's pension surplus.
"We'll have the financial strength to grow beyond our current footprint by investing in new assets, including acquisitions that improve our business," said Steve Voorhees, Rock-Tenn's chief executive.
Voorhees will lead the new company. MeadWestvaco Chairman and CEO John A. Luke Jr. will be nonexecutive chairman.
Rock-Tenn shares rose $3.86, or 6.1%, to $66.85 on Monday while MeadWestvaco gained $6.31, or 14%, to $51.35.
The transaction is the largest in the paper industry since Koch Industries Inc. acquired Georgia-Pacific in 2005 for about $12.6 billion, according to data compiled by Bloomberg.