MeadWestvaco Corporation
(
MWV
) has decided to spin-off the Consumer & Office Products
business in a new entity on April 24, 2012. The decision follows
the company's announcement in November last year to merge the new
entity with the office supply manufacturer,
ACCO Brands Corporation
(
ABD
). The deal was valued at $860 million.
Under the merger agreement, for each share of MeadWestvaco, its
shareholders will own 0.33 share of ACCO Brands. At the completion
of the agreement, the shareholders of MeadWestvaco will own a 50.5%
stake in the office products company and the company will receive
$460 million of cash, both of which are qualified as tax-free
distribution. Moreover, ACCO Brand will change its ticker symbol
from "ACCO" to "ABD" as part of the deal.
It is expected that the spin-off and the merger process will be
closed by April 30 and become effective from May 1. There will be
two markets in the New York Stock Exchange for MeadWestvaco common
stock - a regular way market and an ex-distribution market - from
April 24 to the expected closing date.
With the spin-off, MeadWestvaco will be able to intensify its
focus on its targeted global packaging markets. The initiative will
also divert the company's resources to its core business.
Although MeadWestvaco's total sales increased 6% year over year
to $6.1 million in 2011, the company was hard hit by the ongoing
global crisis including weak housing and labor markets in U.S. as
well as the financial crisis in Europe. These resulted in lower
consumer confidence, tighter inventory management, and softer
demand.
The decision to spin-off the office business was included in the
strategic plans of MeadWestvaco to brave through the challenging
market conditions. As part of the plan, the company decided to
invest in the Packaging Resources segment, which is the highest
revenue-earning segment with nearly 47% of total sales in 2011.
Recently, the company completed the acquisition of Polytop
Corporation in order to increase its capabilities in the targeted
packaging end markets. MeadWestvaco is hopeful that commercial
excellence and opportunities of the packaging business in emerging
markets will help in generating more than $1 million of additional
revenues over the next three to five years. These initiatives are
expected to position the company as the leader in the packaging
industry.
However, the company faces intense competition in each of its
businesses, in both domestic and international markets. It competes
with many large, well-established companies like
Bemis Company, Inc
.
(
BMS
) and
Sealed Air Corporation
(
SEE
)as well as some lower cost manufacturers. The strong competition
could result in pricing and demand pressures, adversely affecting
the company's operating results.
The shares of MeadWestvaco currently retain a Zacks #3 Rank,
implying a short-term "Hold" rating on the stock.
ACCO BRANDS CP (
ABD
): Free Stock Analysis Report
BEMIS (
BMS
): Free Stock Analysis Report
MEADWESTVACO CP (
MWV
): Free Stock Analysis Report
SEALED AIR CORP (
SEE
): Free Stock Analysis Report
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