MeadWestvaco, Ga.-based Rock-Tenn join to form $16B packaging company

Shares of both companies hit all-time highs late last week.

MeadWestvaco Corp. stockholders will receive 0.78 shares of the combined company for each share they own. Rock-Tenn shareholders will be allowed to choose either 1 share of the combined company or a specific cash amount for each Rock-Tenn Co. share held.

The previously announced spin-off of MeadWestvaco's specialty chemicals business will go on as planned.

Rock-Tenn CEO Steven Voorhees will become CEO and John Luke, Jr., chairman and CEO of MeadWestvaco, will become non-executive chairman.

The boards of both companies approved the deal, but it still requires a nod from shareholders.

The company will have its principal executive offices in Richmond, Virginia, where MeadWestvaco is based. It will have operating offices in Norcross, Georgia, where Rock-Tenn is based.

Rock-Tenn has 27,000 employees and MeadWestvaco has 15,000 workers.

The tie-up is expected to close in the second quarter.

MeadWestvaco was targeted last year by Jeff Smith, the CEO of activist investing fund Starboard Value LP. In June Starboard revealed it had bought 5.6 percent of the company's stock. Smith urged the company to cut costs and spin off its non-core businesses.

During the past two weeks MeadWestvaco announced plans to spin off the specialty chemical business and a European packaging unit. 

The companies reported quarterly earnings Monday, and both beat Wall Street expectations.

Rock-Tenn posted first-quarter net income of $125.1 million and revenue of $2.51 billion. MeadWestvaco earned $53 million and recorded revenue of $1.37 billion for its fourth quarter.

For the year, MeadWestvaco reported profit of $263 million, or $1.53 per share. Revenue was reported as $5.63 billion.

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