Amid Turbulent Printing Paper Market, Atlas Holdings Makes Takeover Bid to Acquire Verso

As printers find themselves facing higher paper prices, shortages of several graphic arts grades, and allocations from mills that have removed production capacity, the future direction of one American coated paper provider has become murky with the announcement that private equity firm Atlas Holdings LLC — which already owns several pulp and paper providers, as well as LSC Communications — made an unsolicited takeover bid on July 11 to buy Miamisburg, Ohio-based Verso Corp.

Atlas has offered to acquire publicly-held Verso for $20 per share in cash, putting an enterprise value of the paper manufacturer at approximately $886 million. According to a July 12 Schedule 13D filing with the Securities & Exchange Commission (SEC), the $20 per share offer represents a 15.9% premium over the closing price of Verso common stock on July 9, 2021. Greenwich, Conn.-based Atlas Holdings, along with affiliates Lapetus Capital and Blue World Capital Advisors, already controls 9.12% of the voting power of Verso and has been an activist investor since acquiring outstanding shares in the company.

Verso produces graphic, specialty, and packaging paper, and market pulp. Its graphic paper products are designed primarily for commercial printing, advertising, and marketing applications, including direct mail, catalogs, corporate collateral, books, and magazines. Verso's specialty paper products include release liner papers and label face stock for pressure-sensitive, glue-applied, and laminate applications. The company also produces packaging paper used in packaging and printing applications such as greeting cards, book covers, folders, labels, and point-of-purchase displays. In addition, Verso makes market pulp used in printing, writing, specialty and packaging papers, facial and toilet tissue, and paper towels.

A letter sent by email to Verso President and CEO Randy Nebel from Atlas Holdings Managing Partner Timothy Fazio indicated:

... We believe Atlas is the ideal acquirer of the company given our expertise in executing complex transactions and our experience in the pulp, paper and packaging sector. Atlas is engaged in a variety of industrial sectors and has been successfully investing in the pulp, paper and packaging industries since our formation in 1999, specifically in the sub-sectors in which Verso participates — specialty paper, graphic paper and pulp. Atlas seeks to unlock the full potential of our companies by patiently applying our industry expertise and operating system over the long-term, working closely with the company’s leadership team.

... Given our familiarity with the business and operations of the company, we are well positioned to complete negotiations and execute definitive documentation in an expeditious manner without the need to perform material due diligence. As such, we are prepared to conduct limited confirmatory due diligence immediately and to move swiftly to negotiate definitive documentation in parallel with our confirmatory due diligence review. We have engaged advisors and are prepared to dedicate the necessary resources to close the proposed transaction as promptly as practicable.

In response to the unsolicited takeover offer, Verso issued a press release July 14 acknowledging receipt of the bid, and indicating that its board and financial and legal advisors would review and evaluate the proposal. It also noted, "There can be no assurance that any negotiations between Verso and Atlas Holdings LLC regarding this proposal will take place, and if such negotiations do take place, there can be no assurance that any transaction with Atlas Holdings will occur or be consummated.

"Verso does not intend to make any additional comments regarding the proposal or any other related matter or potential transaction unless and until it is appropriate to do so or a formal agreement has been reached."

Atlas Holdings Is No Stranger to the Printing and Paper Industry

Today, Atlas and its affiliates own 23 companies that generate more than $6 billion in annual revenues and employ approximately 22,000 people in more than 200 manufacturing and distribution facilities across the globe. Atlas targets underperforming or discontinued operations from corporate sellers, bankruptcy purchases, out-of-court restructurings, and reorganizations

Atlas Holdings acquired the assets of the former 2016 RR Donnelley spin-off LSC Communications in early December 2020. The LSC transaction took the publicly-held book, catalog, and magazine printing specialist; logistics provider; and office products supplier — which had filed for Chapter 11 bankruptcy protection — private.

Its portfolio within the paper sector include Finch, a paper manufacturer specializing in uncoated papers; Twin Rivers Paper, a manufacturer of lumber, specialty packaging, label, and publishing papers; Marcal, a paper towel and tissue products manufacturer; and Millar Western, an Alberta-based pulp producer.

In the packaging sector, Atlas holdings include ASG (AGI-Shorewood), a specialized packaging company with facilities in Europe; NPX One, a manufacturer of absorbent pads and expanded polystyrene foam trays for U.S. food processors; and Saxco, a North American distributor of rigid packaging for the wine, spirits, craft beer, and food markets.

Creation of Verso Also Tied to Private Equity

For its part, Verso Corp. also has a company history tied to private equity. The company was formed in August 2006 when Apollo Global Management purchased the coated and supercalendered paper business from International Paper. In April 2008, Verso conducted an initial public offering and was listed on the New York Stock Exchange. In January 2015, Verso also acquired NewPage Holdings, but then filed for Chapter 11 bankruptcy protection in January of the following year.

More recently, Verso blamed COVID-19 and the subsequent drop in demand for graphic paper used to produce advertising materials as the main driver for the July 2020 shutdowns of its mills in Wisconsin Rapids, Wis., and Duluth, Minn. Its Jay (Androscoggin), Maine, mill and its Stevens Point, Wis.-based Rollsource specialty papers business, which serves the forms market, were also sold to Pixelle Specialty Solutions in early 2020.

The takeover attempt by Atlas Holdings of paper manufacturer Verso just marks the latest chapter in an unstable U.S. printing papers market where demand exceeds supply due to paper supplier consolidation, ongoing mill closures, delays in imported paper deliveries due to the pandemic, and existing printing grade paper-making machines being converted to produce higher-margin products, such as packaging and linerboard for boxes.