Chesapeake to Cut Workforce, Take Charge in Revamp

Specialty packaging company Chesapeake (CSK Quote) said Wednesday that it would slice its workforce by 5% and take a $21 million fourth-quarter charge as part of a restructuring.

Richmond, Va.-based Chesapeake said the overhaul is meant to "streamline internal processes, increase efficiency and reduce operating expenses."

The company also extended to Jan. 20 from Jan. 3 its $500 million hostile bid for New York-based rival Shorewood Packaging (SWD Quote).

As part of the restructuring, Chesapeake will shut down a Mechanicsburg, Pa., assembly plant that employs 135 people. The company will reduce staff in other operations as well.

The company said it expects to generate annualized pretax savings of about $11 million (approximately 40 cents per diluted share).

During the fourth quarter, Chesapeake also will record an after-tax gain of approximately $195 million (approximately $11 per diluted share), related to the formation of the Georgia-Pacific Tissue partnership.

Chesapeake continues to expect full year 1999 earnings per diluted share, excluding non-recurring gains and the impact of the fourth quarter restructuring program, to be $1.85-$2.00.

Analysts surveyed by First Call/Thomson Financial expected earnings of $1.96 per share, excluding restructuring charges and special gains.

Chesapeake shares were up 5/8, or 2%, to 30 7/8 in late afternoon trading. (Chesapeake closed up 1/2, or 1.65%, to 30 1/4. Shorewood closed down 5/32, or 0.82%, to 18 7/8.)