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MeadWestvaco sells North Charleston mill for $485 million
By Dan McCue
Staff Writer
MeadWestvaco Corp. is selling its 71-year-old kraft paper mill in North Charleston and related assets to Northbrook, Ill.-based KapStone Paper and Packaging Corp. for $485
million in cash.
MeadWestvaco’s sale to KapStone, the result of a change in corporate strategy, also includes a lumber mill in Summerville and its chip mills in Elgin, Hampton, Andrews and Kinards. Under the terms of the agreement, MeadWestvaco will continue to provide wood fiber to the mill.
MeadWestvaco said it plans to use a substantial portion of the after-tax proceeds of the sale to pay down debt.
In a joint statement, the companies said they expect the transaction to be completed by the end of the year’s third quarter. At the close of the sale, KapStone will also own 100% of Cogen South LLC, the mill’s on-site cogeneration facility. In 2007, the North Charleston mill produced 833,000 tons of saturating kraft, linerboard and kraft folding carton board.
Kraft paper is paper produced from wood pulp. The paper is used for grocery bags, envelopes and other packaging.
MeadWestvaco’s top executive said the paper mill is not a part of the company’s long-term corporate plans.
“I am confident that the North Charleston mill will continue as an industry-leading facility, and that KapStone will be a responsible steward, good neighbor and great asset to the community,” said John A. Luke Jr., MeadWestvaco’s chairman and CEO, in a written statement. “For MeadWestvaco, the markets served by the North Charleston mill are no longer an optimal fit with our long-term strategy.”
Diversified product
Matt Kaplan, KapStone’s president and COO, said that the company was formed in April 2005 precisely with the objective of operating a diversified paper product company.
KapStone bought the bulk of its current assets in January 2007 when it acquired a paper mill in Roanoke Rapids, N.C., and a paper bag factory in Arkansas from International Paper Co. for $155 million.
KapStone’s aggregate revenues in 2007 were $778 million, according to documents provided by the company.
Kaplan said the beauty of the MeadWestvaco deal is that there is virtually no overlap in the product lines or markets the Roanoke Rapids and North Charleston mills serve.
KapStone specializes in the production of paper packaging for a wide variety of goods including cement, flour, sugar and pet care products. It also makes retail shopping bags, fast-food takeout bags and unbleached grocery sacks.
The MeadWestvaco mill, meanwhile, is a market leader in the manufacture of “saturating kraft,” a type of paper found in various decorative and industrial laminates used in furniture, countertops and flooring. The plant also produces Kraftpak, a low-density, high-strength virgin fiber paperboard used in folding cartons and similar end uses.
According to documents used by KapStone to explain the acquisition to its investors, the North Charleston mill currently has a 37% share of the market for saturating kraft globally and a 78% share of the market in the United States.
Sales from the Charleston mill totaled $521 million in 2007.
“We are very excited about this transaction,” Kaplan said. “The Charleston mill and related businesses have been successful in creating strong, long-term customer relationships resulting from outstanding service, quality and innovation. We believe this business is a wonderful fit with our current assets and positions us well for the future.”
Financing in place
Kaplan said the North Charleston mill, which he described as “well maintained and well capitalized,” had been in KapStone’s sights for months before the deal came to fruition. The financing to cover the entire deal is already in place, he said.
The deal calls for the current management of the North Charleston mill and all 1,100 of MeadWestvaco’s current employees at the mill and its affiliated facilities to remain in place and to transition to Kapstone.
The companies emphasized that all existing labor agreements will be honored. Unionized workers at the North Charleston mill recently received a new three-year contract.
Despite the sale of the mill, Luke emphasized that MeadWestvaco is still committed to the Charleston region and to South Carolina as a whole. He said the company’s specialty chemicals division would remain headquartered in the Charleston area, and remains an important part of MeadWestvaco’s strategic growth plan.
Last month, MeadWestvaco announced that it was acquiring Eastman Chemical Co.’s pine chemicals product line and its intention to shift an unspecified amount of work to its Charleston plant. No financial details of that transaction were disclosed.
As part of the sale to KapStone, MeadWestvaco’s specialty chemicals plant will continue to receive raw materials from the North Charleston mill under a long-term agreement.
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@scbiznews.com.
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