MeadWestvaco to Spin Off Unit After Activist Pressure
By Tim Loh
Jan 8, 2015 4:34 PM ET
MeadWestvaco Corp. (MWV)
plans to spin off its specialty chemicals business, as the packaging
company responds to criticism from activist shareholder Starboard
The tax-free transaction is expected to be completed by the end of the
year, the Richmond, Virginia-based company said today in a statement.
MeadWestvaco said it “remains open to other value-creating
alternatives” for the chemicals unit.
The spinoff “will establish two strong companies that are better
positioned to compete and profitably grow in their targeted markets,”
Chairman and Chief Executive Officer John A. Luke Jr. said in the
statement. The unit creates chemicals used in printing inks, asphalt
paving and adhesives, as well as in the agricultural, paper and
Starboard, owner of a 6.1 percent stake according to data compiled by
Bloomberg, has criticized MeadWestvaco’s “conglomerate structure,”
saying it operates disparate businesses with limited synergies. The
fund first disclosed its holding in June, when it called for the
company to more aggressively tackle expenses and explore options for
the chemical business and other units.
Starboard didn’t immediately respond to a call seeking comment.
MeadWestvaco climbed 5.8 percent to $45.59 at the close in New York,
the biggest gain since June 2.
The company is “clearly exhibiting a sense of urgency as it relates to
shareholder value creation,” a group of Robert W. Baird & Co. analysts
Ghansham Panjabi wrote
in a note today.
specialty chemicals unit
had $283 million in sales for the quarter ended Sept. 30, up 8.8
percent from the same period a year prior and accounting for 19
percent of MeadWestvaco’s total revenue. Earnings before interest,
taxes, depreciation and amortization was $77 million for the third
The spinoff could double in size in the next five to seven years by
catering to growing international markets like automobiles, E. Mark
Rajkowski, MeadWestvaco’s chief financial officer, said on a
conference call today. While an outright sale of the unit is still a
possibility, that option would probably be more expensive because of
taxes, he said.
MeadWestvaco will use cash from the spinoff primarily to pay down
debt. The packaging company sells to customers in industries ranging
from health care to food and beverages to commercial printing.
Bank of America Corp. and Goldman Sachs Group Inc. are MeadWestvaco’s
financial advisers and Wachtell, Lipton, Rosen & Katz is the legal
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To contact the editors responsible for this story: Simon Casey at
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