Business News
Rock-Tenn Company Agrees to Acquire Southern Container Corp.
Friday 11. January 2008 - Rock-Tenn Company (NYSE:RKT) today announced that it has agreed to acquire the stock of Southern Container Corp. ("Southern Container"), a privately-held containerboard manufacturing and corrugated packaging business, for $851 million in cash. Rock-Tenn expects that Southern Container will have approximately $142 million in debt outstanding immediately after the acquisition. Southern Container operates the 720,000 ton per year Solvay mill, located near Syracuse, NY, one of the lowest cost recycled containerboard mills in North America, as well as eight integrated corrugated box plants, two sheet plants, and four high impact graphics facilities.
Consolidated net sales of the acquired business for the 52 week period ended September 8, 2007 were $538 million. All corporate approvals of the transaction have been received. The closing is subject to Hart-Scott-Rodino review and other customary closing conditions. Rock-Tenn plans to finance the acquisition with proceeds from $1.4 billion in new credit facilities and the sale of unsecured senior notes. The $1.4 billion will provide the Company with funding to complete the acquisition, refinance the Company’s existing credit facilities and provide in excess of $200 million of undrawn capacity. Wachovia Bank, N.A., Bank of America and SunTrust Bank and certain affiliates of each have committed to provide $1.4 billion in a combination of new credit facilities and bridge financing to support this transaction. The new credit facilities will be secured with certain assets of Rock-Tenn and Southern Container. Additionally, Rock-Tenn’s existing senior notes will share the collateral under the terms of the indenture dated July 31, 1995. Wachovia Capital Markets, LLC acted as financial advisor to Rock-Tenn on the transaction. Rock-Tenn expects to close the acquisition in late March 2008.
Rock-Tenn’s Chairman and Chief Executive Officer, James Rubright said, “We believe Southern Container represents a unique opportunity for Rock-Tenn to expand our corrugated and merchandising display businesses. Our strategy has been to expand and improve our businesses by acquiring very low cost, well invested assets. Southern Container fits this strategy perfectly. It has consistently earned industry leading EBITDA margins with its low cost Solvay mill, modern box plant system and preprint graphics capability.”
The purchase price including debt of Southern Container represents a multiple of approximately 6.9 times Southern Container’s Pro Forma EBITDA (as hereinafter defined) for the 52 week period ended September 8, 2007. Rock-Tenn and Southern Container expect to make an IRC section 338(h) (10) election that will increase Rock-Tenn’s tax basis in the acquired assets and result in a net present value benefit of approximately $150 million, net of gross-up tax payments to be made to Southern Container’s shareholders as a result of the election. Including the net present value of the benefit of the tax basis step-up, the purchase price represents approximately 5.8 times Southern Container’s Pro Forma EBITDA for the 52 week period ended September 8, 2007.