KapStone Paper and Packaging Corporation (KS) has moved a step closer to acquire Longview Fibre Paper and Packaging, Inc., as the U.S. Federal Trade Commission (FTC) reduced the customary waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). However, the all-cash $1.025 billion acquisition now awaits the Federal Energy Regulatory Commission’s approval and is expected to close in the third quarter.
The HSR Act provides the FTC and the Department of Justice (:DOJ) with relevant information about planned mergers and acquisitions. The information is provided to enquire about possible antitrust violations in order to propagate free and fair competitive practices. Under the Act, the parties are liable to wait before they can consummate the deal till the waiting period outlined in the HSR Act has passed, or the government has granted early termination of the waiting period.
KapStone had inked a definitive agreement last month to acquire Longview Fibre to increase its presence in the containerboard market and strengthen its liquidity with strong free cash flow of the latter.
Located in Longview, Wash., 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 likely to be accretive to KapStone with immediate effect and is expected to transform it into a more profitable company with projected 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, Ill, 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 products ranging from containerboard and Kraft paper to unbleached folding carton board products.
KapStone currently has a Zacks Rank #1 (Strong Buy).) Other stocks in the industry that look promising and are worth a look include Fibria Celulose SA (FBR), Klabin S.A. (KLBAY) and Rock-Tenn Company (RKT), each carrying a Zacks Rank #2 (Buy).
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