RockTenn Co agreed to buy Smurfit-Stone Container Corp for about US$3.5 billion, creating North America’s second-biggest producer of containerboard used in shipping boxes.
RockTenn, based in Norcross, Georgia, bid US$35 a share in cash and stock for Chicago-based Smurfit-Stone, RockTenn said in a statement distributed by Business Wire. That’s 27 percent more than Smurfit-Stone’s closing price on Friday.
Growth in demand for containerboard may continue this year after rebounding last year, International Paper Co, the world’s largest paper and pulp maker, said in October last year.
Buying Smurfit-Stone would expand RockTenn’s operations to the Midwest and West Coast on the US.
“The stage seems to be set for increased level of merger and acquisition activity to grow earnings,” said Prasad Patkar, who helps manage about US$1.8 billion at Platypus Asset Management Ltd in Sydney.
“Cash levels on corporate balance sheets are very high at a time when organic revenue growth is proving hard to come by,” Patkar said.
RockTenn fell 0.6 percent to US$57.18 on Friday. The stock has gained 16 percent in the past year. Smurfit-Stone gained 3.2 percent to US$27.52 on Friday.
“RockTenn’s acquisition of Smurfit-Stone is another major step in our transformation,” RockTenn chief executive officer James Rubright said in the statement.
“The containerboard and corrugated packaging industry is a very good business,” he added.
Smurfit-Stone declared bankruptcy in 2009 and emerged last year after closing mills and cutting more than 10 percent of the workforce. Unsecured creditors ended up with 96 percent of the company’s new equity.