WestRock Co. has agreed to buy KapStone Paper and Packaging Corp., the Illinois company that owns the paper mill on Virginia Avenue in North Charleston, for $35 a share.

The companies announced the deal Monday. WestRock will also take on about $1.36 billion of KapStone’s net debt, for a total enterprise value of about $4.9 billion, according to their joint announcement.

For North Charleston, the deal would bring the mill back to the corporate family that sold it. MeadWestvaco Corp. sold the mill, along with a Summerville lumber mill and four South Carolina chip mills, to KapStone on July 1, 2008, for $485 million, according to KapStone’s annual reports. WestRock was formed in 2015 by the merger of RockTenn and MeadWestvaco, KapStone told its employees in a question-and-answer document Monday.

The terms

KapStone stockholders can take $35 a share in cash or choose 0.4981 WestRock shares for each KapStone share, with stock elections capped at 25% of KapStone’s outstanding shares. KapStone Chairman Roger Stone and President and CEO Matt Kaplan signed agreements to vote their shares for the deal, subject to certain limits, the companies said.

WestRock will pay the cash portion with new debt under a fully committed financing package. The deal needs approval from KapStone stockholders and other customary conditions, and the companies expect it to close in the quarter ending Sept. 30. KapStone will then become part of WestRock’s Corrugated Packaging segment.

“KapStone is a great fit with WestRock,” said Steve Voorhees, WestRock’s chief executive officer. “Their complementary corrugated packaging and distribution operations will enhance WestRock’s ability to serve customers across our system, particularly in the western United States, and the addition of their specialty kraft paper products that we do not make enhances our differentiated portfolio of paper and packaging solutions.”

Kaplan said the agreement “is a testament to the tremendous company we have built and the hard work and accomplishments of the KapStone team.”

“The transaction enables us to deliver an immediate and compelling cash premium to our shareholders,” he said.

The North Charleston mill

The North Charleston mill is the second largest of KapStone’s four paper mills. In its most recent annual report, filed in February 2017, KapStone listed its annual capacity at 975,000 tons of containerboard and specialty paper, behind only the mill in Longview, Wash.

The mill uses only virgin wood fiber, and it produces hardwood pulp for DuraSorb saturating kraft, the report said. Union contracts covering about 540 employees at the North Charleston mill had expired, and the mill was operating while negotiations to ratify a new contract continued, KapStone said then.

KapStone’s 3 million tons of paper a year are made from 78% virgin fiber and 22% recovered fiber, the companies said. Adding them would raise WestRock’s overall share of virgin fiber from 65% to 67%.

WestRock expects the deal to produce about $200 million a year in cost synergies and performance improvements by the end of its fiscal 2021. The savings would come from process and capital improvements at mills and box plants, network optimization, purchasing and administrative efficiencies, the companies said.

What workers were told

In its employee Q&A, KapStone said the two companies will operate independently until the deal closes, that pay and benefits will not change in the immediate future, and that existing union contracts at KapStone facilities will remain in effect.

Asked whether there would be layoffs, KapStone said the transaction “is primarily about accelerating growth and positioning the company for continued success.”

A neighbor with a stake

The mill matters to more than its own workers. Ingevity Corp., the North Charleston specialty chemicals company WestRock spun off in 2016, depends on it. In its 2016 annual report, Ingevity said it relies on the KapStone mill for water, compressed air, steam and wastewater treatment at its North Charleston performance chemicals plant. Part of that plant sits on land leased from KapStone next to the mill, the report said.

KapStone, founded in 2005 and based in Northbrook, Ill., makes containerboard, corrugated products and specialty papers and owns Victory Packaging, a packaging distribution company with sites in the United States, Canada and Mexico. It employs about 6,200 people, the companies said.

WestRock, based in Atlanta, had about $15 billion in revenue in fiscal 2017 and about 45,000 employees, KapStone’s Q&A said.