MeadWestvaco evaluating its 650,000-acre land portfolio in five southeastern US states, with a view to maximizing its value; no firm timeline, but president says it 'would be reasonable to expect' there might be some action this year

Audrey Dixon

Audrey Dixon

LOS ANGELES , May 9, 2013 () – Paper and packaging giant MeadWestvaco Corp. (MWV) is evaluating its 650,000-acre land portfolio in five southeastern U.S. states, with a view to maximizing its value.

When it announced its Q1 financial results on April 30, the Richmond, Virginia-based company said it had, at the end of last year, retained Bank of America Merrill Lynch and Goldman Sachs & Co. “to assist in the exploration of strategic options to unlock the value of its Community Development and Land Management assets.”

This process includes forestlands, properties with mineral rights, and development properties in the Charleston, South Carolina, region, according to the company’s April 30 press release.

“When we established the Community Development and Land Management business, we indicated that we would review options when the timing was appropriate,” MWV Chairman and CEO John A. Luke, Jr. said in the release. “An improvement in market fundamentals as well as progress in the business suggested the timing was right to review a broad range of alternatives, and that process is ongoing.”

Luke said MWV was pleased with “the significant progress and value creation our experienced team has achieved,” with respect to MWV’s development projects on more than 100,000 acres in the Charleston area.

He added: “We will consider transactions in which MWV retains control and the present Community Development and Land Management development team remains engaged to ensure that the company’s stewardship commitment remains intact and that our shareholders benefit from the significant value that already has been and will be created with these properties.”

Asked by an analyst during an April 30 conference call to elaborate on a timeline for the land review, MWV’s President Jim Buzzard said it would be premature to “put a line in the sand that would commit us to a timeline”, as the process was in its early stages.

However, Buzzard said the company and its advisors had “done a lot of work over the last several months,” adding: “We are very enthusiastic about the potentials.”

While wanting to move swiftly, the overriding objective was to maximize the value of the overall holdings “with specific focus on the discrete mix that we have of forestland, lands with mineral rights in the development properties,” said Buzzard.

When pressed about a timeline by analyst Mark Weintraub of Buckingham Research Group, Buzzard did acknowledge that it “would be reasonable to expect” there might be some specific action taken during this calendar year.

“I would not want to go on record promising that, but certainly that is within the clear realm of our hopes and expectations,” he said.

Analyst Chip Dillon of Vertical Research noted that a fair amount of MVW lands, beyond the East Edisto, Charleston, area, do not have much development value, but are more recreational, and perhaps a strategic fiber fit for the company.

“So, is it likely that we would see that those lands probably sell for something near or maybe a little bit above their timber value because of the recreational content? “ Dillon asked. “And, secondly, would you likely have some supply arrangements, assuming that you still have some strategic need for the timber off those lands?

MWV CFO Mark Rajkowski said this was ”a key point of consideration as we move through the broad transaction we are contemplating, it is all about maximizing value and not sacrificing the inherent value of any recreational related land. So that is very much at the fore. Second, absolutely, we will be looking for fiber supply agreements, that's going to be an important condition of any transaction we put together.”

The primary sources of this article are an April 30 financial press release from MeadWestvaco Corp. and an April 30 conference call transcript.

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