Champion to Sell Most of Its Packaging Unit

Champion International said Wednesday that it has reached an agreement to sell most of its packaging business to Stone Container Corp. of Chicago in a mostly cash transaction estimated at between $450 million and $475 million.

The operations to be acquired by Stone include a liner board mill in Missoula, Mont., a corrugating medium mill in Ontonagon, Mich., a corrugating medium and specialties mill in York, Pa., as well as 39 corrugated container plants and 13 bag packaging facilities.

Together, the operations have an approximate sales volume of $880 million and employ about 7,000 people, Champion said in a statement. Roger W. Stone, Stone Container’s chairman and chief executive, said the acquisition, combined with his company’s $1.2 billion in sales in 1984, likely would make Stone a $2-billion company in 1986.

The sale hinges upon certain conditions, including approval by shareholders of Stone.

Stone said that about $404 million of the purchase price will be paid in cash, with the balance financed through the issuance to Champion of between 1.6 million and 2 million shares of Stone common stock, as well as warrants for an additional 300,000 shares.

After 5 1/2 years, Stone will have an option to buy back any of the shares held by Champion for between $54 and $66 per share. The warrants expire 6 1/2 years after closing and have an exercise price of $32.50 per share. Including the common stock to be issued and the underlying shares represented by the warrants, Champion will hold about a 12% to 14% interest in the new total of Stone’s common shares outstanding.

Stone’s stock closed down $1.25 at $27 per share Wednesday on the New York Stock Exchange.

After completion of the sale, Champion will continue to operate one liner board and kraft paper mill at Roanoke Rapids, N.C., and a retail packaging plant at Walden, N.Y.

The sale is part of Champion’s previously announced divestiture program designed to reduce the company’s debt.