KapStone Paper to buy MeadWestvaco division for $485M

KapStone Paper and Packaging Corporation has signed an agreement with MeadWestvaco Corporation to purchase its North Charleston Kraft Division and related assets for $485 million in cash, subject to certain post-closing adjustments. KapStone expects to close the deal by the end of third quarter of 2008, subject to customary closing conditions, including regulatory review and receipt of financing.

"The acquisition of MWV's Charleston Kraft Division represents an important step for our company,” said KapStone CEO Roger Stone. “It strengthens our product portfolio by adding saturating kraft and unbleached kraft board and enhances our modest position in the linerboard market. The acquisition also provides us with the opportunity to participate in geographic markets that we do not currently serve."

"We are very excited about this transaction," added KapStone chief operating officer Matt Kaplan. "The Charleston mill and related businesses have been successful in creating strong, long-term customer relationships resulting from outstanding service, quality, and innovation. We believe this business is a wonderful fit with our current assets and positions us well for the future."

KapStone will become a leader in kraft paper and saturating kraft, and the acquisition is expected to intensify KapStone's focus in a very attractive segment of the industrial paper industry. The 2007 aggregate revenues for KapStone and Charleston are expected to be approximately $780 million, and the acquisition is expected to provide substantial free cash flow. KapStone believes that the synergy opportunities for this acquisition are expected to be at least $2.5 million per year with half of the gains to be realizable within the first year of closing of the acquisition. KapStone has received a debt commitment letter from LaSalle Bank National Association and Banc of America Securities LLC for a $585 million senior secured credit facility. The $585 million credit facility is expected to consist of a $100 million revolving credit facility and a $485 million term loan maturing over five years.