US packaging companies RockTenn Co and MeadWestvaco Corp (MWV) are both combining to form a company worth US$16 billion, with MeadWestvaco shareholders owning a majority stake of 50.1% and RockTenn the rest. The combined company, to be named prior to closing, will have adjusted EBITDA of US$2.9 billion, including the impact of US$300 million in estimated annual synergies to be achieved over three years.

MWV shareholders will receive 0.78 shares of the new company for each share held. RockTenn shareholders can choose to receive either one share of the new company for each share held or a cash amount equal to the average price of Rock-Tenn shares during a five-day period ending three trading days before the deal closes.

Steven C. Voorhees, CEO of RockTenn, said, “This transaction brings together two highly complementary organisations to create a new, more powerful company with leadership positions in the global consumer and corrugated packaging markets. This is a terrific opportunity for shareholders, employees and customers of both companies, all of whom stand to benefit enormously from the combination.”

John A. Luke, Jr., Chairman/CEO of MWV, said, “We are creating the leading global provider of consumer and corrugated packaging solutions – and generating significant value for both companies’ shareholders. This transaction is a logical step that is borne of our strategic progress and financial success, and it offers MWV shareholders both immediate value and the opportunity to participate in significant upside as the new company generates substantial growth from its market-focused global strategy.”

Voorhees will serve as CEO/President of the combined company, and Luke will become non-executive Chairman of the board of directors. The board will be comprised of eight directors from RockTenn and six directors from MWV. Other key executives and their positions will be determined according to their strengths and will be named prior to closing. The combined company will maintain its principal executive offices in Richmond, Va., and will have operating offices in Norcross, Ga.

The transaction requires the approval of shareholders of both MWV and RockTenn and is subject to receipt of certain regulatory approvals and other customary closing conditions. Both parties target closing the transaction in the second calendar quarter of this year.

Last year, MWV also announced spinoff of its speciality chemicals business, which will be concluded after the merger. That business provides performance chemicals used in printing inks, asphalt paving and adhesives, as well as in the agricultural, paper and petroleum industries. The business also produces activated carbon products used in gas vapour emission control systems for automobiles and trucks, as well as applications for air, water and food purification.