The Verso Paper Corporation announced on Monday that it would acquire NewPage Holdings, a specialty paper company that emerged from bankruptcy in 2012, in a deal valued at $1.4 billion.
The acquisition, which is subject to regulatory approval, is expected to close in the second half of the year.
The acquisition comes at a challenging time for the paper industry, which must increasingly battle declines in print media as more and more content moves online.
“The combination of Verso and NewPage will create a stronger business that is better positioned to serve our customers and compete in a competitive global marketplace,†David J. Paterson, Verso’s president and chief executive, said in a statement. “We continue to face increased competition from electronic substitution for print and international producers, but as a larger, more efficient organization with a sustainable capital structure, we will be better positioned to compete effectively and deliver solid results despite the industry’s continuing challenges.â€
Verso and NewPage expect that efficiencies between the two companies will yield at least $175 million in pretax cost savings, according to the statement.
NewPage, which filed for Chapter 11 bankruptcy in 2011, reported $3.1 billion in net revenue the next year. Verso, which provides paper products to the media and marketing industries, reported revenue of $1.5 billion in 2012.
The companies will operate 11 manufacturing plants in six states after the transaction closes. Robert P. Mundy, Verso’s senior vice president and chief financial officer, said he did not expect layoffs at any of the mills “at this time.â€
Mr. Mundy said the companies had identified overlap on the corporate-functions side of the businesses, but added that speculation about layoffs would be premature. The combined company will need only one headquarters, for example. Verso is based in Memphis, while NewPage is based in Miamisburg, Ohio.
Representatives for NewPage did not respond to a request for comment.
NewPage’s shareholders will receive total cash and debt of $900 million. That will consist of $250 million in cash, most of which will be paid as a special dividend before the deal closes, with the rest paid at closing, and $650 million of new Verso first-lien notes to be issued at closing. The shareholders will also receive 20 percent of Verso’s common stock.
Verso will finance the transaction through $750 million in loans, which will be used to pay the cash portion of the deal and to refinance an existing $500 million NewPage loan.
Mr. Paterson will run the combined company, and Verso will appoint one of NewPage’s directors to its own board.
Evercore, Barclays, Credit Suisse and Palisades Capital acted as advisers to Verso, along with the law firms Kirkland & Ellis; Morgan, Lewis & Bockius; and Paul, Weiss, Rifkind, Wharton & Garrison. NewPage was advised by Goldman Sachs and Sullivan & Cromwell.
