By RTT News,
January 06, 2014, 10:03:00 AM EDT
(RTTNews.com) - Coated papers maker Verso Paper Corp. ( VRS ) agreed Monday to acquire privately-held peer NewPage Holdings, Inc. in a deal valued at $1.4 billion. The deal, unanimously approved by the boards of directors of both companies, is expected to close in the second half of 2014.
"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," Verso's President and CEO David Paterson said in a statement.
The deal will create a combined company that will have sales of about $4.5 billion and 11 manufacturing facilities located in six states.
The deal is expected to result in at least $175 million of pre-tax total cost synergies, to be achieved during the first 18 months of closure of the deal. The deal will also result is a substantially deleveraged combined entity with a combined company pro forma debt-to-EBITDA ratio than Verso's as standalone.
"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," Paterson added.
The deal will see NewPage's equity holders will receive total consideration of $900 million in cash, stock and debt, consisting of $250 million in cash and $650 million of new Verso first lien notes to be issued at closing.
Additionally, NewPage equity holders will receive up to 25 percent of the outstanding shares of Verso common stock as of immediately prior to closing.
The company noted that most of the cash consideration will be paid to the stockholders as a special dividend prior to closing and the remainder of which will be paid at closing.
Verso noted that certain of NewPage's stockholders owning a majority of its outstanding shares have agreed to vote their shares in favor of the approval of the deal. Verso said it will fund the deal through $750 million in committed financing.
Verso noted that Paterson will lead the combined organization upon closure of the deal, with Verso appointing a current director of NewPage to its board of directors. Until then, the current leadership teams of Verso and NewPage will continue to lead their respective organizations.
In Monday's regular trading session, VRS is currently trading at $2.66, up $2.01 or 309.23% on a volume of 0.22 million shares.
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