Nice Package

The stock that will make me wake up early to watch is Packaging Corp of America (NYSE Symbol: PKG http://finance.yahoo.com/q?s=PKG&d=b). PCA is the sixth largest containerboard manufacturer in the United States (http://www.packagingcorp.com/). By the time I checked in Friday, it was down over a dollar from pre-market action. There was news. A downgrade by Deutsche Securities to hold. And a twenty-five cent quarterly dividend. That is better than four percent, based on Friday's $22.35 close.

But the company also announced a secondary offering of 15.5 million shares of stock by PCA Holdings LLC, an entity controlled by Madison Dearborn Partners LLC, in an offering underwritten by JP Morgan and Goldman Sachs. Then PCA will repurchase up to 4.5 million shares from PCA Holdings. Who are all these people? The Yahoo message board is quiet. According to the press release posted on Yahoo (http://biz.yahoo.com/ap/051209/packaging_corp_offering.html?.v=1), PCA expects to have 103.7 million shares outstanding at the conclusion of the offering and repurchase. That specific nugget is missing from the official press release posted at PCA's IR web page. Anyway, according to their balance sheet, there were more than 108 million common shares outstanding on September 30. That means there will eventually be four million fewer shares outstanding, and the earnings per share should rise. Unless I'm missing something. I've got no problem holding this bag, as long as the price per share stays put.