MeadWestvaco Spins Off Office Biz - Analyst Blog
November 18 2011 - 10:03AM
Zacks
MeadWestvaco Corporation (MWV) has entered into
an $860 million “spin-merge” deal under which it will spin off its
Consumer and Office Products business. The unit will then merge
with ACCO Brands Corporation (ABD), one of the
world’s largest office supply manufacturers.
The transaction is expected to be completed in the first half of
2012. At closing, MeadWestvaco shareholders will receive 50.5% of
the shares of ACCO Brands stock and the company will receive $460
million of cash. The deal is valued at approximately $860 million
based on ACCO Brands’ closing stock price of $6.96 on November 16,
2011.
MeadWestvaco shareholders will receive approximately one share
of ACCO Brands for every three shares of MeadWestvaco held as of
the record date. The business will be managed by ACCO’s executives
and board.
The Consumer & Office Products segment manufactures,
sources, markets and distributes school, office and time-management
products in North America and Brazil through both retail and
commercial channels. Its leading brand names include AMCAL,
AT-A-GLANCE, Cambridge, Day Runner, Five Star, Mead and Trapper
Keeper.
In fiscal 2010, the Consumer & Office Products segment
contributed 14% to MeadWestvaco’s total revenue; through the first
nine months of 2011, the business helped generate 12% of
MeadWestvaco’s total revenue. The segment reported sales of $526
million in the first nine months of 2011, up 3% from the year-ago
comparable period.
During 2011, the North American back-to-school season finished
in line with expectations, but slightly lower than 2010. Sales
volume of time management products were affected due to unfavorable
timing of shipments.
However, higher sales at Tilibra, the segment's Brazilian
operation, helped offset some of the North American volume decline.
Tilibra also benefited from higher volume from a shift of Brazilian
back-to-school volume into 2011 from 2010.
Consumer & Office Products booked segment profit of $93
million in the first nine months of 2011 compared with $84 million
in the comparable year-ago period. Improved pricing and product
mix, higher productivity, and favorable foreign currency exchange
were partially offset by $18 million of input cost inflation of
certain raw materials, freight and other items along with lower
volume.
Following a strategic review of its businesses, MeadWestvaco has
decided to exit unprofitable operations and product lines to
refocus on growth markets. MeadWestvaco plans to concentrate on and
grow its Packaging business and has targeted the food, beverage,
healthcare, personal care, home and garden and tobacco markets for
growth.
In February, 2011, the company completed the sale of its
envelope products business for cash proceeds of $55 million and at
September-end 2010, the company finalized the sale of its media and
entertainment packaging business for cash proceeds of $68
million.
The current transaction will further improve MeadWestvaco’s
overall growth profile and help the company focus on opportunities
in large and growing global packaging markets. The proceeds from
the deal will also boost its core businesses.
Additionally, MeadWestvaco shareholders will have a majority
ownership in ACCO, which in turn will gain from the addition of
MeadWestvaco’s brands to its existing portfolio and a wider global
footprint. We also like MeadWestvaco’s increasing investments in
emerging markets.
However, ongoing macro-economic challenges in developed markets
and the impact on consumer demand, higher costs for certain raw
materials and freight remain concerns. The shares of MeadWestvaco
currently maintain a Zacks #3 Rank (Hold rating) over the short
term.
Richmond, Virginia-based MeadWestvaco Corporation provides
solutions to companies operating in the health care, beauty and
personal care, food, beverage, home and garden, tobacco, and
commercial print industry. The company’s segments include Packaging
Resource, Consumer Solutions, Consumer & Office Products,
Specialty Chemicals, Community Development and Land Management. It
competes with International Paper
Co. (IP), Republic Services, Inc.
(RSG) and Weyerhaeuser Co. (WY).
ACCO BRANDS CP (ABD): Free Stock Analysis Report
INTL PAPER (IP): Free Stock Analysis Report
MEADWESTVACO CP (MWV): Free Stock Analysis Report
REPUBLIC SVCS (RSG): Free Stock Analysis Report
WEYERHAEUSER CO (WY): Free Stock Analysis Report
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