Verso will finance the acquisition through $750 million in financing, the company said. Dave Paterson, chief executive of Verso, will lead the combined organization. At closing, Verso will appoint a NewPage director to its board.
Until the closing, the current officers of Verso and NewPage will continue to lead their respective organizations, the company said.
The combined company will have sales of about $4.5 billion and 11 manufacturing facilities located in six states. The transaction, which has been unanimously approved by the directors of both companies, is expected to close in the second half of this year, subject to regulatory approvals.
“At this time, there are more questions than answers,” Shawn Hall, a spokeswoman for NewPage, told the Dayton Daily News. “There are a number of details that still need to be determined, including the location of our headquarters. We really do not have information beyond the news release at this time.”
In July 2012, NewPage said it rejected an earlier acquisition overture from Verso. At the time, NewPage was in Chapter 11 bankruptcy protection, which it left in late 2012.
In 2012, the rejected proposal’s value was put at $1.425 billion, slightly higher than the value of the acquisition deal announced Monday.
In 2012, NewPage said a merger with Verso “posed significant downside risks to its stakeholders, employees, and business.”
In the past nearly 18 months, that attitude has changed. On Monday, NewPage leaders evidently welcomed the acquisition.
“We believe this agreement with Verso represents the best way forward for our stakeholders,” George Martin, NewPage’s CEO and president, said in the same statement.
“The combination of Verso and NewPage will create a stronger business that is better positioned to serve our customers and compete in a competitive global marketplace,” Paterson said in a statement. “We continue to face increased competition from electronic substitution for print and international producers, but as a larger, more efficient organization with a sustainable capital structure, we will be better positioned to compete effectively.”
Jon Kerr, executive director of Miami University’s Paper Science and Engineering Foundation, said the merger makes “perfect sense.” In a challenging environment for U.S. paper producers, mergers will be pursued in order to achieve higher production tonnage and capacity, in an effort to control one’s destiny.
“It’s not necessarily the number of (papermaking) machines you have, it’s the tonnage you can produce every year,” Kerr said.
Under the deal’s terms, NewPage’s equity holders will receive total cash and debt consideration of $900 million, consisting of $250 million in cash, most of which will be paid to the stockholders as a special dividend prior to closing and the remainder of which will be paid at closing, and $650 million of new Verso first lien notes to be issued at closing.
NewPage’s equity holders also will receive shares of Verso common stock representing 20 percent (subject to potential adjustment up to 25 percent under certain circumstances) of the outstanding shares as of immediately prior to closing.
NewPage’s debt has been publicly held.
Verso’s financing will be used to pay the cash portion of the merger consideration and to refinance NewPage’s existing $500 million term loan prior to closing.
Representatives from both Verso and NewPage will be chosen to comprise a team in charge of leading integration of both companies, the companies said.
Verso had $1.5 billion in net sales for 2012. Total production capacity generated of its mills is 1.5 million tons of paper and 930,000 tons of pulp.
NewPage has about 350 Dayton-area employees.
Shares of Verso (NYSE: VRS) were up $1.07 in early trading Monday, to $1.72. The stock’s 52-week range is 52 cents to $2.75.
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