Shares of packaging solutions provider
) rose around 3% since the company announced an accelerated share
repurchase (ASR) agreement on Feb 6.
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As per the agreement with BofA Merrill Lynch, a unit of
Bank of America Corporation
) and Goldman, Sachs & Co, which is an entity of The
Goldman Sachs Group, Inc.
), MeadWestvaco will purchase $300 million of outstanding shares,
out of which 7.5 million shares will be received and retired
immediately. The exact number of shares repurchased and retired
by the company will be determined on Jun 30, 2014.
The $300 million ASR is part of MeadWestvaco's previously
announced plan to return $700 million of sale proceeds from the
divestiture of U.S. forestlands to
Plum Creek Timber Co. Inc.
) on Dec 2013. As part of this plan, the company also declared
the disbursement of around $175 million or $1.00 per share in the
form of a special dividend to be paid along with the regular
quarterly dividend in March.
In addition to the ASR, the company expects to use $94 million to
buy back shares from the open market. Repurchases under this
program are anticipated to be complete by the end of
second-quarter 2014. Apart from these, MeadWestvaco repurchased
and retired approximately 3.75 million outstanding shares for
$131 million from the forestland asset sale.
MeadWestvaco reported fourth-quarter 2013 adjusted earnings of 29
cents per share, in a turnaround to the year-ago quarter loss of
5 cents. Despite sluggish consumer demand, growth across targeted
packaging and specialty chemicals end markets, along with
improved pricing and operational performance led to the
However, though MeadWestvaco did not provide any specific
guidance for fiscal 2014 it expects higher earnings in comparison
to fiscal 2013. The company expects the results to be driven by
continuous volume improvement across its targeted paperboard
packaging and high value dispensing, pine chemicals and carbon
technologies solutions, along with increased price realizations
across key consumer and industrial paperboard packaging grades.
Furthermore, improved productivity in the major domestic mills
and significant productivity benefits from higher production in
the Brazilian operation and savings from its overhead reduction
initiative will boost earnings. However, the eurozone crisis
remains a headwind.
Richmond, Virginia-based MeadWestvaco is a global packaging
company that provides innovative solutions to the world's most
admired brands in the healthcare, beauty and personal care, food,
beverage, home and garden, tobacco and agricultural industries.
The company also produces specialty chemicals for automotive,
energy and infrastructure industries.
At present, MeadWestvaco has a short-term Zacks Rank #3 (Hold).