ACCO Brands Corporation (NYSE: ABD), a world leader in branded
office products, and MeadWestvaco Corporation (NYSE: MWV), a world
leader in packaging, today announced the signing of a definitive
agreement to merge MeadWestvaco Corporation’s Consumer & Office
Products business into ACCO Brands in a transaction valued at
approximately $860 million. Upon completion of the transaction,
MeadWestvaco shareholders will own 50.5% of the combined
company.
MeadWestvaco’s Consumer & Office Products business is a
leading manufacturer and marketer of school supplies, office
products, and planning and organizing tools – including the
Mead®, Five Star®, Trapper Keeper®, AT-A-GLANCE®, Cambridge®, Day
Runner®, Hilroy, Tilibra and Grafons brands in the United States,
Canada and Brazil. With the addition of this business, ACCO Brands
increases its scale and strengthens its position as an industry
leader in school and office products.
“This is a transforming event for ACCO Brands,” said Robert J.
Keller, chairman and chief executive officer of ACCO Brands
Corporation. “The merger supports our brand leadership strategy and
will greatly expand our presence in important consumer channels and
faster-growing geographies. We believe that the merger will provide
investors with a compelling financial benefit and further enhance
ACCO Brands’ ability to deliver shareholder value for years to
come. We expect this combination to be immediately accretive and to
significantly strengthen our balance sheet.
“ACCO Brands is positioned as a worldwide leader in the office
products industry, and the addition of MWV’s profitable Consumer
& Office Products business – and its outstanding employees –
should enable significant growth for the new company around the
world,” Keller concluded.
The combination, when completed, will increase ACCO Brands’
annual revenues by more than 50% and is expected to:
- Immediately be accretive to ACCO
Brands’ earnings per share; for the adjusted combined trailing
twelve month period ended September 30, 2011, the combination is
accretive by 70%, excluding synergies and transaction-related
costs;
- Yield $20 million of annualized cost
synergies by 2014;
- Enhance ACCO Brands’ gross profit and
operating income margins; for the adjusted combined trailing twelve
month period ended September 30, 2011 gross profit and operating
income margins were higher by 110 basis points and 260 basis
points, respectively;
- Improve ACCO Brands’ leverage profile;
net leverage for adjusted combined trailing twelve month period was
3.6x versus 3.9x for ACCO Brands standalone;
- Enable ACCO Brands to re-capitalize its
balance sheet and reduce its interest rate significantly;
- Significantly enhance cash flow
generation;
- Increase scale in the mass merchandise
channel providing greater consumer access and cost leverage;
- Bring greater consumer insight and
category management capabilities to the combined entity;
- Provide a $200 million sales leadership
position in Brazil, and double ACCO Brands’ size in Canada;
and
- Add important new brands and products
in key categories to ACCO Brands’ existing portfolio of #1 and #2
brands.
ACCO Brands is one of the world’s largest office supply
manufacturers. More than 80% of sales come from brands holding
leading market positions in their categories. The company has
strong and longstanding customer partnerships and an experienced
management team with a demonstrated track record. Over the past
three years, the company has made significant operational
improvements and has reported consistent gains in earnings per
share.
MeadWestvaco’s Consumer & Office Products business is a
leading manufacturer and marketer of school supplies, office
products, and planning and organizing tools. It maintains a
leadership position within its key market segments, and its brands
– including Mead®, Five Star®, Trapper Keeper®, AT-A-GLANCE®,
Cambridge® and Day Runner® in the U.S., Hilroy in Canada and
Tilibra and Grafons in Brazil – have strong and time-tested brand
equity. MWV’s Consumer & Office Products business invests
heavily in category management, consumer-focused marketing,
forecasting and supply-chain analytics, all of which contribute to
its superior products, positive customer relationships and strong
financial performance.
ACCO Brands Corporation’s financial advisor in the transaction
is Barclays Capital Inc., with William Blair & Company, L.L.C.
providing a fairness opinion. Its legal advisor is Skadden, Arps,
Slate, Meagher & Flom LLP.
Financial Benefit for ACCO Brands Corporation
Shareholders
This transaction delivers significant opportunity for investors
to participate in a larger, more profitable business that is a
leader in the industry. Assuming MeadWestvaco’s Consumer &
Office Products business had been owned by ACCO Brands Corporation
for the trailing twelve-month period ending September 30, 2011, the
company would have combined sales of over $2 billion and adjusted
supplemental EBITDA of approximately $320 million, with the
potential of an additional $20 million from cost synergies.
Pre-synergies, the combination is expected to be significantly
accretive to adjusted earnings per share (EPS), excluding merger
and transaction-related costs. The transaction is expected to
significantly increase cash flow and accelerate the de-leveraging
of ACCO Brands’ balance sheet. Adjusted pro forma net leverage for
the trailing twelve month period was 3.6x and is projected to drop
below 3x by the end of fiscal 2013. (Note: These figures are
unaudited.)
Transaction Details
The separation of the Consumer & Office Products business
from MeadWestvaco Corporation is structured as a “Reverse Morris
Trust” transaction. Under the terms of the merger agreement,
MeadWestvaco will establish a separate entity to hold the Consumer
& Office Products business, the shares of which will be
distributed to MeadWestvaco shareholders in a tax-free transaction
in return for a $460 million dividend to MeadWestvaco from the new
entity holding MeadWestvaco’s Consumer & Office Products
business. Immediately after the spin-off and distribution, the
newly formed company will merge with a subsidiary of ACCO Brands.
This “Reverse Morris Trust” transaction has been approved by the
boards of both companies.
The entity that will hold MeadWestvaco’s Consumer & Office
Products business has commitments for financing that will enable it
to pay the dividend to MeadWestvaco. ACCO Brands has commitments
for financing that will enable it to refinance its existing secured
debt.
Leadership, Approvals and Timing
The combined business will be managed by ACCO Brands’ senior
executive team and board of directors, which will include two
directors designated by MeadWestvaco Corporation. ACCO Brands’
headquarters will remain in Lincolnshire, Illinois.
The transaction is subject to approval by ACCO Brands
shareholders and the satisfaction of customary closing conditions
and regulatory approvals, including a ruling from the U.S. Internal
Revenue Service on the tax-free nature of the transaction. The
transaction is expected to be completed in the first half of
2012.
Webcast
At 9:30 a.m. Eastern Time today, ACCO Brands Corporation will
host a conference call to discuss the strategic benefits of the
transaction. The call will be broadcast live via webcast. The
webcast can be accessed through the Investor Relations section of
www.accobrands.com. The webcast will be in listen-only mode and
will be available for replay for one month following the event.
At 10:30 a.m. Eastern Time today, MeadWestvaco Corporation will
host a conference call to discuss the transaction and the company’s
strategic focus on packaging. Investors may participate in the live
conference call by dialing 1 (800) 288-9626 (toll-free domestic) or
1 (612) 332-0418 (international); passcode: MeadWestvaco. Please
call to register at least 10 minutes before the conference call
begins. The live conference call and presentation slides may be
accessed on MeadWestvaco Corporation's website at www.mmv.com.
After connecting to the home page, go to the Investors page and
look for the link to the webcast. Please go to the website at least
15 minutes prior to the call to register, download and install any
necessary audio software. A replay of the call will be available
for one month via the telephone starting at 12:00 p.m. EDT on
November 17th, and can be accessed at 1 (800) 475-6701 (toll-free
domestic) or 1 (320) 365-3844 (international); access code:
225669.
Non-GAAP Financial Measures
“Adjusted” results exclude all unusual tax items. Adjusted
supplemental EBITDA from continuing operations excludes other
non-operating items, including other income/expense and stock-based
compensation expense. Adjusted results and supplemental EBITDA from
continuing operations are non-GAAP measures. There could be
limitations associated with the use of non-GAAP financial measures
as compared to the use of the most directly comparable GAAP
financial measure. Management uses the adjusted measures to
determine the returns generated by its operating segments and to
evaluate and identify cost-reduction initiatives. Management
believes these measures provide investors with helpful supplemental
information regarding the underlying performance of the company
from year to year. These measures may be inconsistent with measures
presented by other companies.
About ACCO Brands Corporation
ACCO Brands Corporation is a world leader in branded office
products. Its industry-leading brands include Day-Timer®,
Swingline®, Kensington®, Quartet®, GBC®, Rexel, NOBO, Derwent,
Marbig and Wilson Jones®, among others. Under the GBC brand, the
company is also a leader in the professional print finishing
market.
Forward-Looking Statements
This press release contains certain statements which may
constitute "forward-looking statements” as that term is defined in
the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to certain risks
and uncertainties, are made as of the date hereof and the company
assumes no obligation to update them. ACCO Brands Corporation's
ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Because actual results may
differ from those predicted by such forward-looking statements, you
should not place undue reliance on them when deciding to buy, sell
or hold the company’s securities. Among the factors that could
cause our plans, actions and results to differ materially from
current expectations are: fluctuations in the cost and availability
of raw materials; competition within the markets in which the
company operates; the effects of both general and extraordinary
economic, political and social conditions, including continued
volatility and disruption in the capital and credit markets; the
effect of consolidation in the office products industry; the
liquidity and solvency of our major customers; our continued
ability to access the capital and credit markets; the dependence of
the company on certain suppliers of manufactured products; the risk
that targeted cost savings and synergies from previous business
combinations may not be fully realized or take longer to realize
than expected; future goodwill and/or impairment charges; foreign
exchange rate fluctuations; the development, introduction and
acceptance of new products; the degree to which higher raw material
costs, and freight and distribution costs, can be passed on to
customers through selling price increases and the effect on sales
volumes as a result thereof; increases in health care, pension and
other employee welfare costs; as well as other risks and
uncertainties detailed in the company’s Annual Report on Form 10-K
for the year ended December 31, 2010, under Item 1A, “Risk
Factors,” and in the company’s other SEC filings. Forward-looking
statements relating to the proposed merger involving ACCO Brands,
MWV’s Consumer & Office Products business and MeadWestvaco
Corporation include, but are not limited to: statements about the
benefits of the proposed merger, including future financial and
operating results; ACCO Brands’ plans, objectives, expectations and
intentions; the expected timing of completion of the merger; and
other statements relating to the merger that are not historical
facts. With respect to the proposed merger, important factors could
cause actual results to differ materially from those indicated by
such forward-looking statements, including, but not limited to:
risks and uncertainties relating to the ability to obtain the
requisite ACCO Brands Corporation shareholder approval; the risk
that ACCO Brands or MeadWestvaco Corporation may be unable to
obtain governmental and regulatory approvals required for the
merger; the risk that a condition to closing of the merger may not
be satisfied; the length of time necessary to consummate the
merger; the risk that the cost savings and any other synergies from
the transaction may not be fully realized or may take longer to
realize than expected and the impact of additional indebtedness.
These risks, as well as other risks associated with the merger,
will be more fully discussed in the proxy statement/prospectus that
will be included in the registration statement on Form S-4 that
will be filed by ACCO Brands with the SEC in connection with the
merger.
Additional Information
In connection with the proposed transaction, ACCO Brands
Corporation will file a registration statement on Form S-4 with the
SEC. This registration statement will include a proxy statement of
ACCO Brands Corporation that also constitutes a prospectus of ACCO
Brands, and will be sent to the shareholders of ACCO Brands.
Shareholders are urged to read the proxy statement/prospectus and
any other relevant documents when they become available, because
they will contain important information about ACCO Brands and the
proposed transaction. The proxy statement/prospectus and other
documents relating to the proposed transaction (when they are
available) can be obtained free of charge from the SEC’s website at
www.sec.gov. The proxy statement/prospectus and other documents
(when they are available) can also be obtained free of charge from
ACCO Brands upon written request to ACCO Brands Corporation,
Investor Relations, 300 Tower Parkway, Lincolnshire, Illinois
60069, or by calling (847) 484-3020.
This communication is not a solicitation of a proxy from any
security holder of ACCO Brands Corporation. However, ACCO Brands
and certain of its directors and executive officers may be deemed
to be participants in the solicitation of proxies from shareholders
in connection with the proposed transaction under the rules of the
SEC. Information about the directors and executive officers of ACCO
Brands Corporation may be found in its 2010 Annual Report on Form
10-K filed with the SEC on February 24, 2011, and its definitive
proxy statement relating to its 2011 Annual Meeting of Shareholders
filed with the SEC on April 4, 2011.
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