MWV Specialty Chemicals, a division of
), has agreed to buy the remaining shares of Resitec Industria
Quimica, Ltda, a leader in the development of chemical product
solutions in Brazil. For the last four years, MeadWestvaco owned
Resitec in a 50-50 joint venture with South Africa-based AECI
Limited. The financial terms of the transaction were not
MEADWESTVACO CP (MWV): Free Stock Analysis
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Resitec is a leading producer of emulsifiers for synthetic
rubbers and other elastomers. It owns a manufacturing facility
located in the city of Duque de Caxias, Rio de Janeiro. It also
has an oil refinery in the city of Palmeira, Santa Catarina,
Resitec produces chemical products for the rubber, lubricants,
food and adhesive markets. Post acquisition, it will also serve
in the asphalt and oilfield markets. It exports its products to
elastomers, lube-oils and adhesives, among many other markets in
the U.S., Latin America, Southeast Asia and Europe.
MeadWestvaco decided to buy Resitec to fortify its core pine
chemical business in Brazil and Latin America. It intends to
augment its product portfolio to reach a wider client base.
Further, it will give MeadWestvaco the opportunity to serve and
grow in the profitable and expanded markets of oilfield,
adhesives and paving solutions.
The acquisition fits well with MeadWestvaco's strategy that
includes significant investments in Brazil which is recovering
moderately. The market demand is also returning to normal in the
MeadWestvaco has operated in Brazil for nearly 60 years. MWV
Rigesa is a leader in the Brazilian corrugated packaging market.
The company started up the new paperboard machine in Brazil
during third-quarter 2012, which is expected to add to its
earnings and cash flows in 2013.
However, the inflationary pressure, particularly on wages, will
be headwind for MeadWestvaco. Therefore, the company has to focus
on improving its pricing and product mix.
MeadWestvaco's third-quarter 2012 adjusted earnings of 39 cents
per share were in line with the Zacks Consensus Estimate. Total
revenues remained flat year over year at $1.40 billion in the
reported quarter, surpassing the Zacks Consensus Estimate of
MeadWestvaco retains a short-term Zacks #3 Rank (Hold). We have a
long-term Neutral recommendation on the stock.