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Source: Bloomberg, January 8, 2015 article


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 Value LP.

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 petroleum industries.

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.

Doubling Size

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 led by Ghansham Panjabi wrote in a note today.

The 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 quarter.

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 adviser.

To contact the reporter on this story: Tim Loh in New York at

To contact the editors responsible for this story: Simon Casey at Tina Davis

©2015 Bloomberg L.P. All Rights Reserved


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