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Management Side
Technical Side
RockTenn to Acquire Smurfit-Stone Container Corporation
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Norcross, Georgia, USA, and Creve Coeur, Missouri, USA, 23 January 2011 -- (BUSINESS WIRE) -- RockTenn (NYSE:RKT) and Smurfit-Stone Container Corporation (NYSE:SSCC) today announced that the boards of directors of both companies have approved a definitive agreement under which Smurfit-Stone will become a wholly owned subsidiary of RockTenn.

The aggregate consideration, consisting of 50% cash and 50% RockTenn stock, is valued at USD 35 per share of Smurfit-Stone common stock, and represents a 27% premium to the Smurfit-Stone's closing stock price on 21 January 2011. The aggregate equity value of the transaction, based on the closing price of RockTenn's common stock on 21 January 2011, is approximately USD 3.5 billion.

This strategic transaction, unanimously approved by the boards of directors of both companies, will create a USD 9 billion leader in the North American paperboard packaging market. Upon closing, RockTenn will maintain its headquarters in Norcross, Georgia.

Smurfit-Stone is one of the industry's leading integrated containerboard and corrugated packaging producers and one of the world's largest paper recyclers. Smurfit-Stone has manufacturing mill capacity of 7.0 million tons, and when combined, RockTenn will have 9.4 million tons of total production capacity, including 7.5 million tons of mill production in the containerboard market.

James A. Rubright, RockTenn's chairman and chief executive officer, said, "RockTenn's acquisition of Smurfit-Stone is another major step in our transformation of RockTenn to be the most respected company in our business, with a laser focus on exceeding our customers' expectations and creating long-term shareholder value. The containerboard and corrugated packaging industry is a very good business and U.S. virgin containerboard is a highly strategic global asset. With this acquisition, RockTenn's fiber input ratio will be 55% virgin and 45% recycled. We believe this transaction provides the greatest possible career opportunities for our co-workers from both companies."

Patrick J. Moore, Smurfit-Stone's chief executive officer, said, "The Smurfit-Stone management team and the board of directors are sharply focused on creating value for shareholders. This transaction immediately achieves this objective, creating a stronger combined company that is well positioned to deliver long-term value to shareholders and high-quality, innovative packaging solutions to its valued customers."

The combined RockTenn and Smurfit-Stone will be the No. 2 producer of containerboard in North American and No. 2 producer of coated recycled board. The tranaction expands Rock-Tenn's geographic footprint to the Midwest and West Coast

Transaction Summary

Smurfit-Stone will become a wholly owned subsidiary of RockTenn. For each share of Smurfit-Stone common stock, Smurfit-Stone stockholders will be entitled to receive 0.30605 shares of RockTenn common stock and USD 17.50 in cash, representing 50% cash and 50% stock. The aggregate consideration is USD 35 per Smurfit-Stone common share. The consideration represents a 27% premium to Smurfit-Stone's closing stock price on 21  January 2011.

The aggregate purchase price being paid for Smurfit-Stone's equity in the transaction is approximately USD 3.5 billion, consisting of approximately USD 1.8 billion of cash and the issuance of 30.9 million shares of RockTenn common stock. Following the acquisition, RockTenn shareholders will own approximately 56% and Smurfit-Stone shareholders will own 44% of the combined company.

In addition to the equity consideration, RockTenn will assume Smurfit-Stone's net debt and pension liabilities. As of 31 December 2010, Smurfit-Stone's net debt was USD 0.7 billion and its pension liabilities were USD 1.1 billion (USD 0.7 billion after-tax). RockTenn has received USD 3.7 billion in committed bank financing from Wells Fargo Bank N.A., Rabobank, and SunTrust Bank to finance the cash portion of the transaction, to refinance existing debt, and to provide liquidity for the combined operations.

The purchase price, including Smurfit-Stone's net debt and after-tax pension liability as of 31 December 2010, represents a multiple of 6.1x Smurfit-Stone's annualized adjusted EBITDA of USD 820 million for the three months ended 31 December 2010.

The transaction is expected to close in the second calendar quarter of 2011 and is subject to customary closing conditions, regulatory approvals, as well as approval by both RockTenn and Smurfit-Stone stockholders.

Wells Fargo Securities acted as exclusive financial advisor to RockTenn and King & Spalding LLP acted as legal counsel. Smurfit-Stone's financial advisor was Lazard and its legal advisor was Wachtell, Lipton, Rosen & Katz.

Conference Call and Webcast

RockTenn will host a conference call to discuss its results of operations for the first quarter of fiscal 2011, the acquisition of Smurfit-Stone Container Corporation, and other topics that might be raised during the discussion on 24 January 2011. A replay of the conference call will be available through 15 March 2011, at 866-351-2785 (USA); passcode: ROCKTENN. A replay of the webcast will be available at www.rocktenn.com.

About RockTenn Company

RockTenn (NYSE:RKT) is one of North America's leading manufacturers of paperboard, containerboard and consumer and corrugated packaging, with annual net sales of USD 3 billion. RockTenn's 10,400 employees are committed to exceeding their customers' expectations - every time. The company operates locations in the United States, Canada, Mexico, Chile, and Argentina. For more information, visit www.rocktenn.com.

About Smurfit-Stone Container Corporation

Smurfit-Stone Container Corporation is one of the industry's leading integrated containerboard and corrugated packaging producers and one of the world's largest paper recyclers. Smurfit-Stone generated net sales of USD 6.3 billion in 2010, has led the industry in safety every year since 2001, and conducts its business in compliance with the environmental, health, and safety principles of the American Forest & Paper Association. The company is a member of the Sustainable Forestry Initiative.

Additional Information and Where to Find It

In connection with the proposed transaction, RockTenn and Smurfit-Stone will be filing documents with the Securities and Exchange Commission (SEC), including the filing by RockTenn of a registration statement on Form S-4 that will include a joint proxy statement of RockTenn and Smurfit-Stone that also constitutes a prospectus of RockTenn.

RockTenn and Smurfit-Stone stockholders are urged to read the registration statement on Form S-4 and the related joint proxy statement/prospectus when they become available, as well as other documents filed with the SEC, because they will contain important information. The final joint proxy statement/prospectus will be mailed to stockholders of RockTenn and stockholders of Smurfit-Stone.

Investors and security holders may obtain free copies of these documents (when they are available) and other documents filed with the SEC at the SEC's Web site at www.sec.gov, or by contacting John Stakel, VP-treasurer, RockTenn Investor Relations, at 678-291-7901 or Smurfit-Stone Investor Relations at 314-656-5553 or Smurfit-Stone Media Relations at 314)-656-5827.

Pro Forma Adjusted EBITDA (as defined)

Pro forma adjusted EBITDA is calculated as the sum of RockTenn's credit agreement EBITDA and Smurfit-Stone's adjusted EBITDA plus pro forma adjustments consistent with the two. The definitions of pro forma adjusted EBITDA may differ from other similarly titled measures at other companies.

Credit Agreement EBITDA

RockTenn's credit agreement EBITDA is calculated in accordance with the definition contained in the existing senior credit facility. Credit agreement EBITDA is generally defined as consolidated net income, plus consolidated interest expense, income taxes of the consolidated companies determined in accordance with GAAP, depreciation and amortization expense of the consolidated companies determined in accordance with GAAP, certain noncash and cash charges incurred, and charges taken resulting from the impact of changes to accounting rules related to the expensing of stock options.

Smurfit-Stone's Adjusted EBITDA

Smurfit-Stone's EBITDA is generally defined as net income plus interest expense, income taxes, interest expense, net and depreciation, depletion, and amortization. Adjusted EBITDA is defined as EBITDA adjusted for reorganization items, restructuring charges, and gain or loss on disposal of assets.

The following pro forma financial information is based on the pro forma combination of the three months ended 31 December 2010 results for Rock-Tenn and Smurfit-Stone and an estimate of a preliminary purchase price allocation. The pro forma diluted income per share of combined Rock-Tenn was USD 1.48 per share indicating an accretion of USD 0.21 per share for the three months ended 31 December 2010.








Summary Financial Results

(In millions, except per share data; $ = U.S. dollars)

 








Historical

RockTenn



Pro Forma

Combined








Net Sales

$ 761.1

$ 2,389.1
Credit Agreement EBITDA / Pro Forma Adjusted EBITDA

$

132.1



$

336.9

Net Income

$ 50.3

$ 105.0
Diluted Earnings Per Share

$ 1.27

$ 1.48
Pro Forma Accretion




$ 0.21







Net sales for the combined entity are subject to further modification to identify and eliminate intercompany sales. Pro forma adjustments to net income primarily consist of adjustments to depreciation and amortization and interest expense related to the purchase price, an adjustment to add back Smurfit-Stone's reorganization items, and an adjustment to eliminate restructuring costs. Not all of these adjustments would be reflected in the pro forma financial information included in a document filed with the SEC.

Set forth below is a reconciliation of credit agreement EBITDA and pro forma adjusted EBITDA for the three months ended 31 December 2010, to the most directly comparable GAAP measure, consolidated net income. Certain reclassifications to Smurfit-Stone amounts or descriptions have been made.




RockTenn


Smurfit-

Stone


Pro Forma

Adjusted


Pro Forma

Combined
























Consolidated Net Income

$ 51.3
$ 49.0
$ 5.7

$ 106.0
Interest Expense, net


15.1

22.0

2.4


39.5
Income Taxes


27.3

27.0

3.2


57.5
Depreciation and Amortization


36.7

85.0

12.1


133.8
Additional Permitted Charges and other


1.7

22.0

(23.6 )

0.1
Credit Agreement EBITDA / Adjusted EBITDA / Pro Forma Adjusted EBITDA

$ 132.1
$ 205.0
$ (0.2 )
$ 336.9



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