Appleton Papers going public; deal creates new firm Appvion, Nasdaq listing
APPLETON, May 17, 2012 (Menafn - The Post-Crescent - McClatchy-Tribune Information Services via COMTEX) --Appleton Papers is looking to its past to move forward.
In what the company referred to Wednesday as a "business combination" with Dallas-based Hicks Acquisition Co. II, the 105-year-old maker of specialty paper coatings will operate under a new name Appvion.
The new name is a combination of the words "applied" and "innovation" to reflect its evolution from papermaker to a company that will focus on coating formulations, applications and specialty chemicals when the deal closes this summer.
It will be business as usual, said Bill Van Den Brandt, company spokesman. The company's executive staff and 870 workers in Appleton, also its headquarters, are unaffected.
The move will give the company more cash, which can be used to pay down debt, he said.
"We're really going back to our roots," Van Den Brandt said. When the company launched in 1907, it was built on placing coatings on paper products.
"It's our core strength, the idea of putting coatings on paper and chemistry formulation," Van Den Brandt said. "We are are thinking of ourselves more like a specialty coating company and less than a papermaker."
The deal
The deal is valued at about 675 million and turns the privately held company into a publicly traded firm that will be listed on the Nasdaq exchange under the ticker APVN.
Brian Jacobsen, chief portfolio strategist with the investments group of Wells Fargo Funds Management in Menomonee Falls, said an infusion of cash will benefit the business.
"Equity companies are actually good for business," he said. "They can help clean things up. Instead of withering and dying in a slow-growth industry with mountains of debt, equity companies help turn things around."
Appleton Papers has been involved in dredging operations to clean up tons of polychlorinated biphenyls or PCBs, a chemical once used in the making of carbonless paper, from the Fox River north of De Pere. Appleton Papers has been battling in court over its share of the cleanup costs.
NCR and Appleton Papers formed a company to conduct river dredging. In a recent ruling by U.S. District Judge William Griesbach, he agreed with a request by the federal government to shift federal liability for conducting the cleanup to NCR, though Appleton Papers will still be on the hook for 60 percent of the cost.
The overall cleanup cost, earlier estimated at 750 million, has been growing. Appleton Papers estimated in March it has spent 190 million on the cleanup so far.
The company asked in March to be allowed to suspend or reduce dredging efforts this year and hinted that jobs could be at stake if the company continued to pay for the dredging.
Jacobsen, the Wells Fargo strategist, does not view the deal as a purchase of Appleton Papers by Hicks.
"Instead (Appleton Papers) got more investors to help make the company viable," he said.
Under the terms of the merger, Hicks, a publicly traded investment group, will invest cash held in trust -- minus expenses and amounts paid for certain repurchases and redemptions of its stockholders -- to acquire an equity interest in Appleton Papers.
Appleton Papers announced in February a 15-year supply deal, valued at 3 billion, with Domtar Corp. to be its primary source of uncoated base paper. The move cost 330 jobs at Appleton Papers' West Carrollton, Ohio base paper mill, but it also brought 50 jobs to Appleton.
Van Den Brandt said this move reflects the company's strategy.
"Our deal with Domtar and buying uncoated paper from them, that idea of focusing on our core strengths," he said. "Papermaking is not one of (those core strengths)."
Ripple effect
Deals with equity firms generally lead to a company being sold after a few years once profitability reaches a point to turn the business for a profit.
Van Den Brandt said that is not the goal.
"Public shareholders are holding the equity in the firm," he said. "What they are looking for is to increase value in their investment through increased share price. The real benefit is taking a private company public."
Jacobsen characterized Hicks as a "blank-check company," meaning it was formed specifically for acquiring another business, which allows the purchased business to quickly list on an exchange.
He said these types of transactions are "fairly common."
Appleton Papers has been an employee-owned company for years. Van Den Brandt said that will continue, though under the new structure, the company no longer is obligated to repurchase shares from employees who decide to sell them.
Van Den Brandt said if a shareholder opted to sell his or her stock, the company was legally obligated to buy the stock, thereby absorbing the debt.
"Once our shares are publicly traded, if someone decides to sell, they can do it on the open market," he said.
The benefit to shareholders is shares likely will see more liquidity as the company opens itself to public investment.
Jacobsen said the company under its current structure is heavily indebted but under its new banner will have more cash and has potential to get more.
"That liquidity could be very valuable," he said.
This likely will lead to pressure from shareholders to improve company profitability to drive up share value.
Sometimes improving profitability leads to organizational restructuring and job loss, he said.
"Sure, it could mean job cuts, but job cuts are better than bankruptcy," Jacobsen said.
Appleton Papers earlier this month reported its first quarter net sales totaled 219.6 million, a 1 percent increase when compared to the same quarter a year ago. It logged 860 million in overall sales in 2011.
Van Den Brandt said the move is positive.
"We are becoming a stronger company as a result of this," he said. "We have smart investors who are looking to increase the value of their investment."
-- Larry Avila: 920-993-1000, ext. 292, or lavila@postcresent.com; On Twitter @LarryAvila.
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