Verso Paper Corporation of Memphis entered an agreement to acquire NewPage Holdings Inc. in a transaction valued at US$1.4 billion. The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the second half of 2014.
Verso is one of North America’s largest producers of coated papers, while NewPage Holdings, which filed for filed for Chapter 11 bankruptcy protection back in September 2011, is described as a primary producer of printing and specialty papers. Upon closing of the transaction, the combined company will have sales of approximately US$4.5 billion and 11 manufacturing facilities located in six American states.
“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,” stated David Paterson, Verso’s President and CEO, who is to lead the combined organization. “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 and deliver solid results despite the industry's continuing challenges.”
Under the terms of the transaction, NewPage’s equity holders will receive total cash and debt consideration of US$900 million, consisting of US$250 million in cash. 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.
Verso plans to complete the acquisition through US$750 million in committed financing, which will be used to pay the cash portion of the merger consideration and to refinance NewPage’s existing US$500 million term loan prior to closing. The US$1.4 billion transaction is composed of the cash consideration, the US$650 million of new Verso first lien notes, Verso common stock and the refinancing of NewPage’s US$500 million term loan.
“We believe this agreement with Verso represents the best way forward for our stakeholders,” stated George Martin, President and CEO of NewPage. “A combined Verso and NewPage will be able to achieve greater efficiencies, which will enable it to serve clients with a high level of product quality and innovation.”