NEW YORK (AP) - Coated papers maker Verso Paper is buying NewPage Holdings Inc. in a deal valued at $1.4 billion including debt.
Privately held NewPage produces printing and specialty papers.
Verso President and CEO David Paterson said in a statement on Monday that the buyout will put it in a better position to face increased competition. Paterson will lead the combined company, which will have 11 manufacturing plants in six states and sales of about $4.5 billion.
The deal includes $250 million in cash and $650 million of new Verso first lien notes that will be issued at closing. NewPage will also receive Verso shares representing 20 percent of the outstanding stock immediately prior to closing. This amount may be adjusted to up to 25 percent under certain circumstances. The deal also includes the refinancing of NewPage's $500 million term loan.
The transaction is anticipated to result in at least $175 million in pre-tax cost savings. These savings are expected within the first 18 months after the deal's completion.
A NewPage director will join Verso's board at closing.
The deal was unanimously approved by both companies' boards. It is targeted to close in the second half of the year.
Shares of Verso Paper Corp. more than quadrupled, rising $2.01 to $2.66 in morning trading.
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