MeadWestvaco, Rock-Tenn merger to benefit large buyers of packaging materials
In collaboration with Suman Ghosh and Jayant Mukherjee, Lead Analysts - Packaging
One of the largest M&A wave has now reached the shores of North American packaging companies.Rock-Tenn and MeadWestvaco Corp, makers of cardboard cartons and other types of packaging materials, have agreed to form a combined company to challenge the biggest player in the market: International Paper.Rock-Tenn's strength lies in corrugated boxes, which are used as packages by the likes of online retail companies. Whereas MeadWestvaco holds a prominent position in paper cartons that are used to wrap food, luxury and other CPG products.
So far, International Paper has been the sole "one-stop-shop" supplier of all forms of packages i.e, boxboards and containerboards.
And now a combined Rock-Tenn (RKT) and MeadWestvaco (MWV) would create yet another "one-stop-shop" supplier that would eventually benefit large procurement organizations who look to consolidate most -- if not all -- of their packaging spend with a single supplier.
The point to be noted here is that prior to the deal, MWV had zero presence in containerboard. However, the combined entity will bring together Rock-Tenn's strength in containerboard and MWV's core area of boxboard -- thereby creating alternate sourcing opportunities for major conglomerates in North America.
The new company would emerge as a boxboard giant with a total capacity of 3.7 million tons per year, comprising of around 26% production share in the North American market. The entity will also produce 8 million tons of containerboards per year, which translates to about 20% share in the North American market.
From a geographic spread point of view, MWV's strong presence in emerging markets, coupled with Rock-Tenn's North American base will help the new entity to play out each other's strength.
Combination of MWV's three large kraft paperboard mills and RKT's bleached kraft and recycled boxboard mills has the potential to improve the new entity's market share.
The new company would offer the below mentioned product mix and the revenue might follow the same pattern:
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