From Staff Reports
CUMBERLAND — Verso Paper Corp., a leading North American producer of coated papers, and NewPage Holdings Inc., a leading producer of printing and specialty papers, announced Monday that they have entered into a definitive agreement under which Verso will acquire NewPage in a transaction valued at $1.4 billion.
Upon closing of the transaction, the combined company will have sales of approximately $4.5 billion and 11 manufacturing facilities located in six states. The transaction, which has been unanimously approved by the boards of directors of both companies, is expected to close in the second half of 2014, subject to regulatory approvals.
“Thanks to our team of dedicated employees, the Luke mill finished 2013 with improved year-over-year performance in both safety and production. Our focus will remain on making the Luke mill an even safer and more cost-effective operation in 2014 so that we will be a valuable asset to our new organization,” Rick Watro, Luke Mill manager, said.
The Luke mill, which is now owned by NewPage, employs nearly 900 people.
In the summer of 2012, NewPage turned down a proposal to combine operations with Verso while NewPage was in Chapter 11 bankruptcy.
NewPage emerged from bankruptcy in December 2012. At that time, it had completed a financial restructuring including a $500 million term loan from Goldman Sachs Lending Partners LLC and a $350 million revolving credit line from J.P. Morgan Securities LLC.
“The combination of Verso and NewPage will create a stronger business that is better positioned to serve our customers and compete in a competitive global marketplace,” said David Paterson, Verso’s president and chief executive officer. “We continue to face increased competition from electronic substitution for print and international producers, but as a larger, more efficient organization with a sustainable capital structure, we will be better positioned to compete effectively and deliver solid results despite the industry’s continuing challenges. Furthermore, we believe the transaction provides stakeholders in both companies with meaningful, compelling value.”
George Martin, president and CEO of NewPage, said, “We believe this agreement with Verso represents the best way forward for our stakeholders. A combined Verso and NewPage will be able to achieve greater efficiencies, which will enable it to serve clients with a high level of product quality and innovation. Together we will have increased manufacturing efficiency, greater flexibility and an even more solid and capable platform.”
The combination of the two companies is expected to result in at least $175 million of pretax total cost synergies, which are expected to be achieved during the first 18 months after completion of the transaction.
Under the terms of the transaction, NewPage’s equity holders will receive total cash and debt consideration of $900 million, consisting of $250 million in cash, most of which will be paid to the stockholders as a special dividend prior to closing and the remainder of which will be paid at closing, and $650 million of new Verso first lien notes to be issued at closing.
NewPage’s equity holders also will receive shares of Verso common stock representing 20 to 25 percent of the outstanding shares immediately prior to closing.
Verso will finance the acquisition through $750 million in committed financing, which will be used to pay the cash portion of the merger consideration and to refinance NewPage’s existing $500 million term loan prior to closing. The transaction is subject to regulatory approvals and other closing conditions.
Paterson will lead the combined organization. Verso has agreed to appoint to its board of directors a current director of NewPage. Prior to closing, the current leadership teams of Verso and NewPage will continue to lead their respective organizations.
Representatives from both Verso and NewPage will be chosen to comprise a team in charge of leading integration efforts on behalf of the combined company after the closing. The two companies will work together to ensure a smooth transition for their stakeholders, and their focus will be to retain the best talent from Verso and NewPage for the combined company.
Verso Paper Corp. is a leading North American producer of coated papers, including coated groundwood and coated freesheet, and specialty products, with $1.5 billion in net sales for the year ended Dec. 31, 2012. Verso is headquartered in Memphis, Tenn., and owns paper mills in Maine and Michigan.
NewPage is a leading producer of printing and specialty papers in North America with $3.1 billion in net sales for the year ended Dec. 31, 2012. NewPage is headquartered in Miamisburg, Ohio, and owns paper mills in Kentucky, Maine, Maryland, Michigan, Minnesota and Wisconsin.