Rock-Tenn acquires Southern Container

NORCROSS - Rock-Tenn Co. announced Friday that it will buy Southern Container Corp. for $851 million in cash.

Southern Container Corp. is a privately owned container board manufacturing and corrugated packaging business headquartered in Long Island, N.Y. It operates one mill, eight integrated corrugated box plants, two sheet plants, and four high-impact graphics facilities.

Current owner Steven Grossman and his family have run the company for more than 60 years. Grossman has no other family members in the business and agreed to the sale in order to provide for the company's future and protect its roughly 1,400 employees, according to a statement released by Southern Container.

Rock-Tenn expects that Southern Container will have about $142 million in debt outstanding following the acquisition. Its net sales for 2007 were $538 million.

Gregory King, Rock-Tenn's vice president of risk management and treasurer, said it is unlikely that any employees will be moved to New York, nor does the company expect to add or lay off employees as a result of the acquisition.

"They are a stand-alone entity," King said. "Their president will report directly to our CEO."

Rock-Tenn's growth plan relies heavily on acquisitions.

"Our strategy has been to expand and improve our businesses by acquiring very low cost, well invested assets," said James Rubright, Rock-Tenn's Chairman and Chief Executive Officer. "Southern Container fits this strategy perfectly."

It most recently acquired Gulf States Paper Corp. in June 2005.

"We worked very hard to bring that business into Rock-Tenn and had very good success by paying down the debt borrowed," King said.

Rock-Tenn plans to finance the acquisition with proceeds from $1.4 billion in new credit facilities and the sale of unsecured senior notes. The $1.4 billion will provide funding to complete the acquisition, refinance the Company's existing credit facilities and provide more than $200 million of undrawn capacity.

The sale should be final in March.

King said Rock-Tenn expects the acquisition of Southern Container to increase its stock share price by 15 cents to 20 cents per share. Those shares closed Friday at $21.92, down about 7 percent.

Rock-Tenn Company manufacturers packaging products, merchandising displays and bleached and recycled paperboard. The Company's annual net sales total $2.3 billion and operating locations in the United States, Canada, Mexico, Chile and Argentina.