KapStone Paper and Packaging Corporation ( KS ) recently announced that it has inked a definitive agreement to acquire Longview Fibre Paper and Packaging, Inc. for $1.025 billion in cash. The strategic buy is aimed to increase KapStone's presence in the containerboard market and strengthen its liquidity with Longview Fibre's strong free cash flow.
Located in Longview, WA, in close proximity to several sea ports and with easy access to inter-state highways, Longview Fibre is a premier manufacturer of high quality containerboard, specialty Kraft papers and corrugated containers. Its facilities include a network of corrugated container plants in four Western states and a mill in Longview, which produces 1.15 million tons of containerboard and Kraft paper annually.
Manufacturing over 70 grades of Kraft paper and containerboard, Longview Fibre recorded net sales of $831 million in 2012, with an EBITDA of $118 million. Over the past several years, Longview Fibre has diligently increased its productivity with superior execution of its operating plans and benefiting largely from increased demand for containerboard and extensible Kraft paper. The acquisition is accretive to KapStone with immediate effect and is likely to transform it into a more profitable company with expected synergies of approximately $10 million within the first 18 months.
On the other hand, Longview Fibre anticipates leveraging KapStone's expertise and global presence to better serve its own customers. In addition to a complementary product line, the merger also facilitates Longview Fibre to have a considerable presence in the corrugated container market in the U.S.
Founded in 2005 and headquartered in Northbrook, IL, KapStone is a leading producer of unbleached Kraft paper and corrugated products. It is the parent company of KapStone Kraft Paper Corporation and KapStone Container Corporation, and operates three paper mills and 15 converting plants across the U.S. The company, which has a market cap of roughly $1.7 billion, offers a range of products, including containerboard, Kraft paper and unbleached folding carton board products.
KapStone currently has a Zacks Rank #3 (Hold).) Other stocks in the industry that look promising and are worth a look include PH Glatfelter Co. ( GLT ), Cosan Ltd. ( CZZ ), and LyondellBasell Industries NV ( LYB ), each carrying a Zacks Rank #2 (Buy).
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