Smurfit-Stone Container Corporation (Nyse:sscc) Shares Surges New High Following Rkt Offer

Google+ Pinterest LinkedIn Tumblr + Container Corporation (NYSE:SSCC)went up by 27.18% to trade close at $35.00 after the company has entered into a definitive agreement with industry rival Rock-Tenn, according to which Rock-Tenn Co. (RKT) said it would buy the company for $3.5 billion.

Shares of the container-board producer climbed to its new annual high of $35.80 with an unusual high volume of 56 million shares, 66 times above the daily average volume of 0.845 million shares. The 52 week low of the stock is $15.91. Currently, the market capitalization of the stock stands at $3.21 billion with P/E of 0.06.

RockTenn announced that it is offering $35/share, a 27% premium from January 21 close for SSCC. The offer consists of 50% cash and 50% RockTenn stock. The share component is based on a ratio of 0.30605 RKT shares per SSCC share. The acquiring company will pay $3.5 billion to the acquired company. This will include $1.8 billion in cash and the issuance of 30.9 million Rock-Tenn shares. The deal is expected to close in 2Q11. Boards of both the companies have approved the purchase.

The acquisition would triple Rock-Tenn’s annual revenue to the tune of $9 billion. In addition, RockTenn will assume SSCC’s net debt of $0.7 billion and after-tax pension liabilities of $0.7 billion. The total deal offer is approximately $5 billion. RockTenn forecasts $150million annual run-rate synergies are expected to be realized within 24 months of the close. The new merged company will be the number 2 North American producer in containerboard with a market share in the 25% range.

Rock-Tenn is obtaining bank loans for financing the cash portion of the deal. The company has obtained bank loans worth $3.7 billion from SunTrust Bank and Wells Fargo & Co. It has also obtained loan from Netherland bank Rabobank Group.

Meanwhile, The Company reported fourth fiscal quarter adjusted earnings of 62 cents per share compared to a loss of 6 cents per share last year. Analysts estimated earnings of 60 cents per share. Net income of $49 million or $0.49/share has been reported for the fourth quarter of 2010

The Company said that it expects lower sequential earnings in the first quarter of 2011 compared with the fourth quarter of 2010. Analysts were expecting the Company to report EPS of $0.51 and net income of $48 million for the first quarter of 2011.

Smurfit-Stone Container Corporation (Smurfit-Stone) is an integrated manufacturer of paperboard and paper-based packaging North America, including containerboard and corrugated containers, and is also a paper recycler. Smurfit-Stone is a holding company with no business operations of its own. Continue @

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