MWV merger with RockTenn challenged by lawsuits

The law firm investigations into the transaction have been announced on behalf of MWV shareholders, including Levi & Korsinsky LLP, which has drawn up a class action lawsuit that ‘questions the fairness of the sale of the company to RockTenn Company’.

"The claims concern whether the Board of MWV breached their fiduciary duties to stockholders by failing to adequately shop the Company before agreeing to enter into this transaction, and whether Rock-Tenn is underpaying for MWV shares,"​ the Levi & Korinsky press statement reads.

In a similar vain, an investigation has been filed by Faruqi & Faruqi, which the law firm says will focus "on whether MeadWestvaco’s Board of Directors breached their fiduciary duties to the Company’s stockholders by failing to conduct a fair sales process and whether and by how much this proposed transaction undervalues the Company to the detriment of MeadWestvaco’s shareholders".​

Terms of the proposed merger​

Under the terms of the proposed merger, MWV stockholders will receive 0.78 shares in the combined business for each MWV share, while RockTenn shareholders have the option to receive either one share for every share they own, or cash in on a weighted average price five days before the closing of the deal.

Upon closing of the deal, the ownership structure will be 50.1% MWV and 49.9% RockTenn, while before the closing of the deal approximately 7% of RockTenn shareholders will receive cash instead of stock.

Spin off paved way for the deal, but now what?​

Having split up its specialty chemicals division at the beginning of the year, the path has been cleared for MeadWestvaco (MWV) to merge with RockTenn to form one of the biggest packaging companies in the world.

The merger was announced at the end of last month, when the two companies said the combination of the two businesses, including MWVs considerable footprint in the beauty packaging segment, would create a packaging powerhouse with a combined equity of $16bn.

The deal should also bring about considerable synergies, resulting in cost savings amounting to approximately $300m over the first three years, the companies said.

Closing will be completed once all the relevant regulatory criteria is fulfilled, which should be end of 2Q, at which time the companies say they will announce the new trading name for the joint business.

A leading business in its packaging field​

“We are creating the leading global provider of consumer and corrugated packaging solutions – and generating significant value for both companies’ shareholders,”​ said John A. Luke, Jr., chairman and chief executive officer of MWV.

“This transaction is a logical step that is borne of our strategic progress and financial success, and it offers MWV shareholders both immediate value and the opportunity to participate in significant upside as the new company generates substantial growth from its market-focused global strategy.”​

It was also announced that Steven Voorhees, CEO of RockTenn, will serve as the CEO and president of the combined business, while Luke will become non-executive chairman of the board of directors.

While other key executive appointments are expected to be announced around the time of completion, the companies said that the headquarters for the business would be in Richmond, Virginia, with operating offices in Norcross, Georgia.