Verso Paper cuts number, price of shares in IPO

Coated paper company Verso Paper Corp. on Wednesday pruned the number and expected price of shares to be offered in its pending initial public offering.

The Memphis, Tenn.-based company now plans to offer 14 million shares at $12 per share. Previously, the IPO was expected to total nearly 18.8 million shares and price between $16 and $18 apiece.

Verso also reduced the number of shares it is offering the underwriters as part of an overallotment option to 2.1 million from 2.8 million.

Based on the reduced offering price, Verso expects to raise about $153.3 million, after expenses, and will have a market capitalization of about $624.6 million, or roughly $649.8 million if the underwriters exercise their overallotment option in full.

The company plans to use a majority of the proceeds to repay debt, including a loan that was used to pay dividends.

Verso was formed in August 2006 by affiliates of private equity firm Apollo Global Management LLC to buy out the coated and supercalendered paper division of International Paper Co. Apollo will retain a 67 percent interest in the company following the IPO.

The company's primary products are used in catalogs, magazines, annual reports, brochures, and retail inserts, and its customers include magazine publisher Conde Nast Publications, retailer and catalog merchant Sears Holdings Corp. and commercial printer RR Donnelley & Sons Co.

Verso operates 11 paper machines at four mills, which have a combined annual production capacity of 1.7 million tons of coated paper. Its main competitors include NewPage Corp., which announced plans for an IPO last week, Bowater Inc. and Sappi Ltd.

Recently, rising input costs, higher energy prices and the stronger Canadian dollar have sparked plant closures, reducing North American capacity. With a reduced supply and a steady demand, Verso has been able to raise prices on its paper and said in its prospectus with the Securities and Exchange Commission that it expects paper prices to continue to increase through 2008.

For the three months ended March 31, the company reported a loss of $3.1 million on sales of $453.9 million. This compares with a loss of $35.4 million on revenue of $359.8 million in the prior-year quarter.

Citi and Credit Suisse are the leading underwriters of the deal. Shares are expected to begin trading this week on the New York Stock Exchange under the symbol "VRS."