New York-based investment firm Cerberus Capital Management has agreed to purchase the Papers business of international packaging company MeadWestvaco for $2.3 billion (€1.8 billion). The transaction is expected to close in the second quarter of 2005.
Cerberus bought the business for approximately 1 times the unit’s annual revenues of $2.3 billion. Peter J. Vogel, the current president of MeadWestvaco’s Papers Group, will become chief executive officer of the new company, which consists primarily of four paper mills and 900,000 acres of forestland.
MeadWestvaco, formed in the $3 billion merger between Mead and Westvaco in 2002, will have sales of more than $6 billion after the deal closes. The company will use approximately $900 million to $1.1 billion of the transaction proceeds to pay down debt and between $500 million and $700 million to repurchase the company’s stock.
Cerberus has previously invested in the paper industry, having acquired the building products division of paper manufacturer Georgia Pacific for $810 million in May 2004. The unit, renamed BlueLinx, went public seven months after the Cerberus acquisition in a $128 million IPO.
Cerberus currently manages more than $14 billion in capital. In August, the firm took part in a $1.2 billion acquisition of US department store chain Mervyn’s, led by Sun Capital Partners and including Lubert Adler and Klaff Partners.