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RockTenn Closes Assets Buyout

Zacks Equity Research

RockTenn Co. (RKT) has wrapped up the purchase of the assets of specialty corrugated packaging manufacturer Mid South Packaging LLC from the private equity firm, Coridel Capital Partners LLC. The financial terms were not disclosed.

Mid South Packaging has its operations in Cullman, Alabama, and Olive Branch, Mississippi. It operates through three segments, namely, AutoLogic, the ComboPAC Food Group and the Retail Design Group..

The acquisition of the Mid South assets will not only benefit RockTenn by expanding its existing product portfolio but will also broaden and diversify its customer base with the inclusion of  Mid South’s customers.

Earlier, in 2011, RockTenn had acquired Smurfit-Stone Container Corporation through the merger of Smurfit-Stone into one of its wholly-owned subsidiaries. The acquisition expanded RockTenn’s corrugated packaging business and helped it to increase its market share in the much profitable containerboard and corrugated business.      

Following the acquisition of Smurfit-Stone, RockTenn re-aligned its businesses into three segments (Corrugated Packaging, Consumer Packaging and Recycling and Waste Solutions).  Smurfit-Stone now represents roughly two-thirds of RockTenn’s revenues.

Based in Norcross, Georgia, RockTenn is a leading manufacturer of corrugated and consumer packaging and recycling solutions. The company focuses on low-cost paperboard and packaging products and services. It caters to a wide customer base in the U.S., Canada, Mexico, Chile, Argentina and China.

RockTenn delivered adjusted earnings of 97 cents per share in second-quarter 2012.  Revenues shot up 188% year-over-year to $2,282.9 million, driven by the acquisition of Smurfit-Stone.

However, packaging industry being highly competitive, RockTenn faces intense competition from companies like Clearwater Paper Corporation (CLW) and International Paper (IP). Moreover, rising recycled fiber and chemical costs also remain headwinds for the company.     

RockTenn currently retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on the stock.

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