NEW YORK (TheStreet) -- Shares of Rock-Tenn Co. (RKT) are higher by 10.02% to $69.30 in mid-morning trading on Monday, after it was announced that the manufacturer of corrugated and consumer packaging will merge with MeadWestvaco Corp. (MWV) 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 merger will "create a leading global provider of consumer and corrugated packaging," MeadWestvaco said in a statement.
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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 ROCK-TENN CO as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ROCK-TENN CO (RKT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, RKT's share price has jumped by 27.94%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RKT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- 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 4.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $402.70 million or 29.94% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 14.79%.
- The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
- You can view the full analysis from the report here: RKT Ratings Report