Thursday, May 21, 2015

What the MeadWestvaco Merger Means

Along with a new name comes possible layoffs and fading family influence in the company.

Posted By on Thu, May 21, 2015 at 11:50 AM

click to enlarge MeadWestvaco Chairman and CEO John A. Luke. - SCOTT ELMQUIST
  • Scott Elmquist
  • MeadWestvaco Chairman and CEO John A. Luke.

It’s official. The name on the MeadWestvaco building downtown will change.

MeadWestvaco, which moved its corporate headquarters to Richmond from Connecticut in 2006, is merging with Georgia’s RockTen to create a new packaging behemoth named WestRock with a new stock ticker WRK.

The $16 billion deal announced in January has been sealed.

It isn’t known if layoffs will result. The companies say they are looking at $300 million in savings over the next several years.

A check with Wikipedia shows that MeadWestvaco had about 23,000 employees in 2012. RockTenn has about 26,000 workers. In the merger announcement, the companies say the combined firm will have 42,000 employees, which is 7,000 less than the previously reported totals.

RockTenn’s chief executive officer Steve Vorhees will become the chief executive of the new firm which will be headquartered in Richmond. Operations will be centered in Norcross, Ga.

Signaling a shift away from the Luke family influence of the firm, MeadWestvaco’s top official, John Luke Jr., will become non-executive chairman of the new firm.

Luke, 66, is a member of the founding family that has been in the pulp and paper business since the late 1800s.

After serving in the Air Force as a pilot during the Vietnam War, Luke started work at the company and gradually shifted its focus from large timberland holdings and paper making to packaging.

According to an article published by the Wharton School of Business where he once studied, Luke undertook the radical transformation of the firm after realizing that its old products and marketing would not do well in an industry that was globalizing rapidly.

The firm started selling off hundreds of thousands of acres of timberland in the Southeast and elsewhere. It boosted making packaging for many products, including food, and producing specialty chemicals.

Much of the firm’s design and planning for products has been done in Richmond.

Luke has been a trustee of the right-leaning American Enterprise Institute and a director of the National Manufacturers Association.

He has decried “short-term-thinking, political correctness and growing pressures for quick returns” as part of his overall business strategy.

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