Coming together with merger in mind Regulatory filings shed light on MeadWestvaco, Rock-Tenn negotiations

Steven Voorhees, chief executive officer of Rock-Tenn, will be CEO of the new WestRock Co. formed by Rock-Tenn’s merger with MeadWestvaco.

MeadWestvaco and Rock-Tenn took elements of their existing names to craft a new corporate identity once the packaging companies combine forces: WestRock Co.

Simple enough.

The dealmaking that led to the change wasn’t as cut and dried.

The transaction marks the end of an era for MeadWestvaco, which has been an influential player in the Charleston economy since the 1930s. All the while, it has managed to remain an independent company run by a member of the founding Luke family — until now.

The combination with Norcross, Ga.-based Rock-Tenn was announced in January, but the process began nearly a year earlier, according to a summary of the back-and-forth negotiations both companies filed with the Securities and Exchange Commission.

It began with an informal chat at MeadWestvaco’s headquarters in Richmond, Va., on Feb. 28, 2014. The meeting was called by Rock-Tenn chief executive Steven Voorhees. He wanted to sit down with MeadWestvaco CEO John A. Luke Jr. “to become acquainted and provide an opportunity for them to discuss the existing business relationships between their respective companies.”

“The meeting provided the foundation for subsequent conversations ... as well as the early identification of complementary strengths of the two companies,” according to the filing.

Both companies clearly had merger on their minds. MeadWestvaco quickly assembled a team of Wall Street bankers and financial advisers while senior management began studying the idea of teaming up with Rock-Tenn.

“This preliminary review suggested that the combination ... could not only yield immediate value, through the realization of synergies and increased ... product offerings, but also might increase the capability of each company to realize its current strategic vision,” according to the filing.

Luke pitched the idea to his board, followed by talks with individual directors. In the midst of those one-on-one meetings, in May 2014, Voorhees called Luke to propose a potential merger.

“Mr. Luke responded that the concept was one he also believed both companies should explore,” the filing states.

Luke got the go-ahead to continue talks with Voorhees about a potential “strategic transaction” at a board meeting last June. Interestingly, that same day, the company’s directors received a detailed letter from a large, unhappy shareholder, Starboard Value LP, that called for MeadWestvaco either to find a merger partner or put itself up for sale.

Negotiations were just getting ready to ramp up. Luke and Voorhees met five times last summer in four different cities in Maryland, Virginia and Florida.

Their chief financial officers then got together in New York City to discuss how to value the two companies in the event of a merger.

But they were unable to reach a consensus. MeadWestvaco and Rock-Tenn walked away from the idea in late August.

It wouldn’t be the first time.

Talks resumed a few weeks later, after Rock-Tenn had “reassessed the situation,” according to the filing. But once again, they were bogged down by “key outstanding issues,” including valuation of the businesses as well as differences over how the combined company’s board would operate.

The discussions officially ceased again on Nov. 12, “with no assumption at that time that negotiations would be revived in the foreseeable future,” the filing said.

They would, of course — right after the holidays. By late January, the companies were able to hammer out a proposal giving MeadWestvaco shareholders 50.1 percent of stock of the consolidated business and Luke the position of nonexecutive chairman.

Rock-Tenn directors would get eight of the 14 board seats, and Voorhees would be the CEO, two points that strongly suggest this is more of an acquisition than a merger.

As if there weren’t enough meetings already, shareholders of both companies were asked to gather last week at separate events in Richmond and Atlanta to approve the proposed deal. They did. The WestRock name becomes official Wednesday.

Contact John McDermott at 937-5572