The debate on Super Bowl Sunday often turns to whether this team or that team qualifies as a dynasty.
In the U.S. paper industry, there is no such quibbling: Team Luke is a dynasty.
But the family’s long reign is coming to an end.
Under a merger announced Monday, an heir of the Luke legacy won’t, for the first time ever, be calling the shots at what is now MeadWestvaco Corp., a longtime employer in the Charleston region.
The changing of the guard will end a 127-year run that has spanned six generations.
John A. Luke Jr., who’s been the CEO of the packaging giant for more than two decades, will take the title of nonexecutive chairman once the proposed marriage with the larger Rock-Tenn Co. is finalized, probably later this year. His counterpart at Rock-Tenn, Steve Voorhees, will be moving into the corner office.
“The combination makes tremendous sense for a variety of compelling reasons,” Luke said during a conference call Monday. “Most important, we are leveraging the strengths of both companies into a larger, more diverse, more balanced and more global business.”
However it shakes out, the sale marks the end of one era — a long one, at that — and the start of another.
The Luke family’s ties to the company date back to the beginning, in the late 1880s, when William Luke started Piedmont Pulp & Paper Co. The business was incorporated in 1899 as West Virginia Pulp & Paper Co., which became Westvaco Corp. in 1969 and MeadWestvaco in 2002, following its Mead Corp. buyout
“MWV” has been a mover-and-shaker in the Lowcountry since 1937, when it opened its hulking paper mill along the North Charleston waterfront. John A. Luke Sr., a future CEO, cut his teeth at the Cooper River site from 1949-55. His namesake and successor was about a year old when the family moved to a home on Johnson Road in the Crescent neighborhood off Folly Road.
The younger Luke, an Air Force officer during Vietnam, joined the business in 1979 and took the reins from his father in 1992. The New York Times took note of the promotion: “Luke Family’s Reign Is Extended at Westvaco,” the headline read.
The commodity papermaker bounced along until about a decade ago, when it began what Robert W. Baird senior research analyst Ghansham Panjabi called an “ambitious transformation” that would turn MeadWestvaco “into a leading consumer packaging franchise, with an especially attractive position across the emerging markets.”
“That’s been the single biggest success I think he’s had,” Panjabi said of Luke.
The company started pruning businesses as it expanded globally and focused on high-end consumer packaging materials, specialty chemicals and real estate development.
Under Luke, MeadWestvaco jettisoned an envelope and office products unit. It shed its landmark Cooper River mill in 2008. A year ago, the company unloaded most of its timberlands. In its latest move, MeadWestvaco just announced it will spin off its fast-growing North Charleston-based chemicals division as a stand-alone company.
“What they ended up keeping were the high-margin pieces of the portfolio,” Panjabi said.
The Luke family’s hold on the corner office was shaken last year when activist investor Jeffrey Smith disclosed that his Starboard Value LP had amassed a 5.6 percent stake in MeadWestvaco, an amount it later raised to 6.1 percent. Among other changes, the fund urged the company to slim down and simplify. Also, in a June 2 letter, Smith demanded “absolute objectivity” from the board in evaluating “internal and external candidates” to succeed Luke, and “to choose a leader who has the requisite skill sets needed to execute on the substantial opportunities at MeadWestvaco.”
“I think it all kind of lined up, that there was this outside pressure to monetize shareholder value and divest assets,” Panjabi said.
Also, at 67, Luke is probably thinking about retirement. That, too, contributed to the Rock-Tenn sale “to some extent,” Panjabi said.
While Luke’s C-suite swan song came as a surprise to some, it was inevitable MeadWestvaco would have to pursue a merger, acquisition or other transaction. In hindsight, he’d been preparing for the day when the sun would set on the family dynasty.
“He basically made the company more attractive from a buyout standpoint,” Panjabi said Thursday. “This week’s events confirm that.”
Contact John McDermott at 937-5572,