Verso Paper Corp., which owns two Maine paper mills, has agreed to acquire NewPage Holdings Inc., which owns Rumford Paper.
The deal is worth $1.4 billion and has been approved by both companies’ boards of directors, according to a news release. If all regulatory hurdles are passed, the combined company would have sales of approximately $4.5 billion and 11 manufacturing facilities located in six states.
The combined company would employ approximately 2,300 people at its three Maine mills. Memphis, Tenn.-based Verso employs roughly 1,500 at its paper mills in Jay and Bucksport, while Miamisburg, Ohio-based NewPage employs roughly 800 at its paper mill in Rumford.
The sale is expected to be complete in the second half of 2014, the news release said.
“The combination of Verso and NewPage will create a stronger business that is better positioned to serve our customers and compete in a competitive global marketplace,” David Paterson, Verso’s president and CEO, said in a statement.
John Williams, president of the Maine Pulp and Paper Association, told the Bangor Daily News on Monday that he was “surprised” by the announcement. Verso and NewPage discussed a possible merger last year, but Williams thought those discussions had ended.
Williams declined to predict how the deal would affect the three mills the new company will operate in Maine, but said he was cautiously optimistic it would have a positive effect, at least in the short term.
“I think by combining the two companies Verso should be stronger, so that’s good since they’re a big player in Maine’s paper industry,” Williams said. “But they’ll own a lot of mills across the country, so I just don’t know what it means long term. I hope our mills will be fine, but longer term the new company will be looking at what they want to keep and what they might want to do something different with.”
Historically, though, Maine’s paper mills compete well against mills in other parts of the country, Williams said.
“I can’t think of a situation where there were mergers and consolidations and we ended up losing Maine machines or mills because of that,” he said. “Given that, it may end up being good news for our industry.”
All three Maine mills produce coated paper used in magazines and catalogs. That sector of the paper industry has been challenged by the reduction in print advertising and adoption of digital e-readers. NewPage in November said it was “indefinitely” idling one of its paper machines in Rumford because of falling demand and competition from mills in Europe.
“We continue to face increased competition from electronic substitution for print and international producers, but as a larger, more efficient organization with a sustainable capital structure, we will be better positioned to compete effectively and deliver solid results despite the industry’s continuing challenges,” said Paterson, who will remain CEO of the combined company. “Furthermore, we believe the transaction provides stakeholders in both companies with meaningful, compelling value.”
Verso, which is majority owned by private equity firm Apollo Global Management, will finance the $1.4 billion acquisition through a combination of cash, stock and traditional financing.
Watch bangordailynews.com for updates.