NEW YORK (TheStreet) --Shares of MeadWestvaco Corp. (MWV) are higher by 17.67% to $53 in pre-market trading on Monday morning after the company announced its plan to merge with Rock-Tenn Co. (RKT) in a transaction with a combined equity value of $16 billion.
The combined company will be named prior to the closing of the deal and will have $15.7 billion in net sales and an adjusted EBITDA of $2.9 billion.
The combination will "create a leading global provider of consumer and corrugated packaging," MeadWestvaco said in a statement.
Exclusive Report:Jim Cramer's Best Stocks for 2015
MeadWestvaco shareholders will receive a 50.1% stake in the new company and Rock-Tenn shareholders will hold 49.9%.
"This transaction brings together two highly complementary organizations to create a new, more powerful company with leadership positions in the global consumer and corrugated packaging markets," Rock-Tenn CEO Steven Voorhees said.
"This is a terrific opportunity for shareholders, employees and customers of both companies, all of whom stand to benefit enormously from the combination. Importantly, our two companies are also an exceptional cultural fit, sharing a commitment to exceeding customer expectations and a focus on developing innovative packaging solutions," Voorhees added.
Separately, TheStreet Ratings team rates MEADWESTVACO CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate MEADWESTVACO CORP (MWV) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- MEADWESTVACO CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MEADWESTVACO CORP increased its bottom line by earning $1.78 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($1.84 versus $1.78).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Containers & Packaging industry average. The net income increased by 32.5% when compared to the same quarter one year prior, rising from $80.00 million to $106.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 6.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
- You can view the full analysis from the report here: MWV Ratings Report