The debt-free transaction of $1.025bn in cash will see stock of Longview Fibre Paper and Packaging bought from Brookfield Capital Partners II and the deal is expected to close in the summer this year.
Kapstone said it will increase exposure to the containerboard segment and broaden their Kraft paper line, making them a global producer of extensible multiwall paper, a grade which is growing at about 4% per year.
The firm added they anticipated synergies of $10m within the first 18 months.
Longview’s operations
Longview is a manufacturer of containerboard, lightweight multiwall paper, specialty Kraft papers, and corrugated containers located in the Pacific Northwest region.
The firm’s operations include a mill located in Longview, Washington equipped with five paper machines which produce 1.15 million tons of containerboard and Kraft paper annually.
In 2012, Longview generated $831m in net sales and $118m of EBITDA. In the first quarter of 2013, net sales were $217m generating $42m of EBITDA.
Benefit from day one
Roger W. Stone, chairman and chief executive officer of KapStone, said: “The acquisition immediately adds value for our shareholders by increasing earnings and generating very strong free cash flow.
“The deal is accretive to our bottom-line from Day one. Our balance sheet, which was strong going into this transaction, remains strong after the acquisition.
“The
combined company is expected to deliver substantial free cash flow in the first year allowing KapStone to quickly de-lever."
Randy Nebel, president of Longview, added that both firms’ product lines complement each other and provide a national presence in corrugated containers.
Stone concluded: "Strategically, the acquisition of Longview is the perfect fit for KapStone, and transforms KapStone into a much more profitable and stronger company providing additional momentum for KapStone to continue its record of excellence in increasing value to our shareholders."
KapStone Container Corporation includes three paper mills and 15 converting plants across the Eastern and Midwestern US.