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Tuscarora agrees to Swedish firm's $284 million buyout Packaging and plastics concern Tuesday, January 23, 2001 By Joyce Gannon, Post-Gazette Staff Writer
Tuscarora Inc. Chairman John O'Leary last month told shareholders that a sale of the Beaver County custom plastics maker was not out of the question. So it shouldn't be a surprise that a huge Swedish packaging business has offered to acquire the New Brighton company and that O'Leary and his executives helped put the deal together. Those talks culminated with yesterday's announcement that Tuscarora had agreed to be bought by Stockholm-based Svenska Cellulosa Aktiebolaget (SCA) in a cash transaction valued at $284 million.
Stockholders will receive $21.50 per share under terms of the deal, which O'Leary expects will receive shareholder approval in 60 to 90 days.
The news caused Tuscarora's shares to soar 50 percent, or $6.94 yesterday on the Nasdaq, to $20.94.
In a phone interview after he disclosed details of the sale to Tuscarora employees, O'Leary said all 2,200 workers, including about 100 at its New Brighton headquarters, would be retained.
O'Leary, 54, has signed a long-term employment agreement with SCA to manage a new $450-million specialty packaging division for SCA based at Tuscarora's current headquarters. Among those who will report to O'Leary will be his brother, David, 51, Tuscarora's chief operating officer, who will be senior manager of the North American operations of the new specialty division.
Len Boselovic
The O'Learys' father, John O'Leary Sr., founded Tuscarora in 1962 after working as a purchasing executive for Westinghouse Electric. O'Leary Jr. took over as president and chief executive in 1990 and has overseen Tuscarora's expansion from a producer of molded foam to a manufacturer of corrugated and other packaging materials targeted mainly for the automotive, appliance and high-tech industries.
Tuscarora, which fueled its expansion in recent years through acquisitions and alliances with competitors, has 36 plants and nine design centers in the United States, United Kingdom, Ireland and Mexico.
For the fiscal year ended last August, Tuscarora reported net income of $14.2 million on sales of $273.7 million.
SCA is a $7-billion business that makes paper, packaging and hygiene products, including tissue and paper napkins.
If the deal is approved, Tuscarora will become part of SCA's global packaging business based in Brussels, Belgium.
"This gives SCA access to a market they don't have any real presence in at the moment, at what looks like a good price," Per Andersson, an analyst with Swedbank, told Bloomberg News.
"I think they're getting a darn good company. They're buying it at a reasonable price," said Bob Kanters, research director in Legg Mason's Downtown office.
Though the companies didn't discuss a possible merger until just a month ago, Tuscarora and SCA have known each other "a good long time," O'Leary said. Tuscarora has a strategic alliance with SCA's Asian division and has also worked with SCA in the United Kingdom.
SCA made overtures about acquiring Tuscarora around the Christmas holidays, performed due diligence in late December and made a verbal offer in early January.
Tuscarora's board of directors, which owns about 15 percent of the company's shares, approved a formal offer Friday afternoon, O'Leary said.
While Tuscarora wasn't actively shopping for a buyer, it has discussed going private or taking other strategic actions to boost its lagging stock price, O'Leary said. "When [SCA] expressed significant interest, we were prepared to hear them out and thought [SCA's offer] was a good and fair value."
Pittsburgh investment brokerage, Parker/Hunter Inc., whose chairman, Robert W. Kampmeinert, sits on Tuscarora's board, advised Tuscarora on the SCA offer.
The pending acquisition will provide a windfall for the O'Learys, other senior executives and Tuscarora shareholders.
According to Tuscarora's Nov. 16 proxy statement, stock owned by O'Leary Jr. and his family is worth $2.9 million at the $21.50 per share SCA is paying. In addition, he'll collect nearly $1.5 million more from stock options.
David O'Leary and his family own stock worth $3.3 million and his options are worth $864,000.
Chief Financial Officer Brian C. Mullins owns shares worth $722,000 and he'll collect $808,000 from options.
Directors Abe Farkas and his daughter Karen, who with other family members and trusts own 455,100 shares, stand to collect $9.8 million if the acquisition is approved.
O'Leary doesn't expect Tuscarora to immediately change its name once the deal is finalized, but that could happen eventually.
"I suppose that needs some further study but there's nothing planned in the short term," he said.
Separately yesterday, SCA said it was acquiring some assets of pulp and paper company Georgia-Pacific Corp. for $850 million. The plants to be acquired make tissue brands, including Coronet.
That deal is expected to position SCA as No. 3 in the national tissue market behind Georgia-Pacific/Fort James and Kimberly-Clark, according to WSJ.com, an online news service of The Wall Street Journal.
O'Leary called Tuscarora's proposed merger with a European company "a perfect example" of the effects of doing business in a global economy.
"One of the things that brought us to do this, beyond our obligation to our shareholders, is that our customers are global. This creates multinational businesses."
Post-Gazette staff writer Len Boselovic contributed to this report.
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