DELAWARE, Ohio, Dec. 20,
2018 /PRNewswire/ --
Highlights
- Caraustar is a leading vertically-integrated paperboard
manufacturer that operates four primarily complementary businesses
in North America
- Immediately accretive to margins, earnings per share and free
cash flow
- Strong free cash flow generation will drive rapid deleveraging,
allowing for meaningful equity accretion and enhancing Greif's
strategic flexibility for capital deployment
- Significantly strengthens and balances Greif's portfolio and
expands its paper franchise by acquiring a vertically integrated
leader in recycled paperboard manufacturing
- Significant value creation opportunity, with at least $45
million of annual run-rate cost synergies identified
- Attractive transaction enterprise value of $1.8 billion, corresponding to 8.2x the last
twelve month run-rate EBITDA of
$220 million, or 6.8x the synergized
run-rate EBITDA of $265 million
- Offers strong cultural fit and alignment due to Caraustar's
close operational adjacency to Greif's mill operations and the
strong management and teams they possess
Transaction Overview
Greif, Inc. (NYSE: GEF, GEF.B), a
global leader in industrial packaging products and services,
announced today that it has entered into a definitive agreement to
acquire Caraustar Industries, Inc., a leading recycled paperboard
and packaging solutions company, from an affiliate of H.I.G.
Capital, in a cash transaction valued at $1.8 billion. The transaction is expected to
close during the first quarter of calendar year 2019, subject to
customary closing conditions, including regulatory
clearances.
Caraustar is a market leader in the production of uncoated
recycled paperboard (URB) and coated recycled paperboard (CRB),
with a variety of applications that include tubes and cores and a
diverse mix of specialty products. Based in Austell, Georgia, Caraustar's footprint
includes over 80 operating facilities throughout the United States. For the last twelve months
ended September 30, 2018 Caraustar
generated sales of $1.4 billion and
EBITDA of $174 million. Based on trailing twelve month actual volume,
adjusted for current market conditions as of September 30, 2018, the run-rate EBITDA is
$220 million.
"Caraustar offers an exceptional strategic and cultural fit for
Greif," said Greif's President and Chief Executive Officer,
Pete Watson. "Its complementary
paper packaging and recycled fiber operations will drive
significant free cash flow growth, improve balance and
profitability within the Greif portfolio and increase Greif's
exposure to U.S. industrial and consumer end markets. Most
importantly, Greif and Caraustar share the same dedication to
providing industry-leading service to all customers. I am excited
to welcome our new colleagues to the Greif family and look forward
to working closely with them."
"We are excited about today's announcement and what it means for
Caraustar's customers and employees," added Caraustar President and
Chief Executive Officer, Mike
Patton. "Greif is a well-known market leader with a strong
manufacturing base. Our customers will benefit from Greif's
customer service focus and broad product offering and our employees
will join a culture with a strong legacy for service and
quality."
Strategic benefits from the acquisition
The
transaction significantly enhances Greif's scale and scope in the
industrial packaging market, creating significant competitive
advantages and long-term operating leverage. In addition, the
transaction:
- Is immediately accretive to earnings and financial profile. The
addition of Caraustar will be immediately accretive to Greif's
margins, earnings per share and free cash flow per share before
synergies. Strong pro-forma free cash flow is expected to drive
rapid deleveraging, setting the stage for meaningful equity
accretion and enhancing Greif's strategic flexibility for capital
deployment going forward.
- Strengthens and balances Greif's portfolio. The addition of
Caraustar is expected to increase Greif's U.S. sales to roughly two
thirds of total consolidated sales from approximately half for
fiscal 2018. In addition, the percentage of Greif's sales from
paper packaging will expand to approximately half of total
consolidated revenues compared to 23 percent for fiscal 2018.
- Provides significant value creation through substantial cost
synergies and performance improvements. The transaction is expected
to generate annual run-rate cost synergies of at least $45
million within 36 months of closing through an identified
combination of back office savings; transportation optimization;
recycled fiber savings; operational improvements; and other
procurement-related activities.
- Increases the scale and breadth of Greif's paper packaging
product offering. Caraustar is a market leader in uncoated recycled
paperboard (URB) and coated recycled paperboard (CRB) with an
attractive mix of industrial and consumer customers. Additionally,
Caraustar sells a variety of specialty paper products that will
complement Greif's Paper Packaging & Services specialty
portfolio.
- Offers strong cultural fit and alignment. Caraustar operates a
business with close operational adjacency to Greif's current mill
operations and possesses an aligned operational philosophy and
close cultural overlap.
Transaction financing
Wells
Fargo Bank, National Association, Goldman Sachs Bank USA and JP Morgan Chase Bank, N.A., have
provided financing commitments for this
transaction, providing additional term loans and bridge
financing to a planned issuance of senior unsecured notes, subject to customary terms and
conditions. Greif's expected leverage ratio at the
closing of the transaction will be approximately 3.5x and the
company expects to return to within its targeted leverage
ratio range of 2.00x to 2.50x within 36 to 48 months.
Advisors
Goldman Sachs & Co. LLC acted as exclusive financial
advisor to Greif for the transaction. Allen and Overy LLP, Vorys,
Sater, Seymour and Pease LLP and Ice Miller LLP acted as legal
advisors to Greif. Rothschild & Co and Credit Suisse acted
as financial advisor to Caraustar for the transaction. Ropes &
Gray LLC acted as legal advisor to Caraustar.
Webcast information
The Company will host a conference
call to discuss the Caraustar acquisition on December 20, 2018, at 9:30
a.m. Eastern Time (ET). To participate, domestic callers
should call (833) 231-8265. The Greif ID is 9996183. The number for
international callers is +1-(647) 689-4110. Phone lines will open
at 9:00 a.m. ET. The conference call
will also be available through a live webcast, including slides,
which can be accessed at http://investor.greif.com by clicking on
the Events and Presentations tab and searching under the events
calendar. A replay of the conference call will be available on the
Company's website approximately two hours following the call.
About Greif, Inc.
Greif is a global leader in
industrial packaging products and services and is pursuing its
vision: in industrial packaging, be the best performing customer
service company in the world. The company produces steel, plastic
and fibre drums, intermediate bulk containers, reconditioned
containers, flexible products, containerboard and packaging
accessories and provides filling, packaging and other services for
a wide range of industries. Greif also manages timber properties in
the southeastern United States.
The company is strategically positioned in over 40 countries to
serve global as well as regional customers. Additional information
is on the company's website at www.greif.com.
About Caraustar
Caraustar Industries, Inc. is a leader
in the manufacturing of high-quality recycled materials and paper
products. The company is a socially responsible corporation, is
committed to environmentally sound practices and is dedicated to
providing customers with outstanding value through innovative
products and services.
Caraustar's four business lines include Recycling Services, Mill
Group (coated and uncoated paperboard and specialty paperboard
products), Industrial Products Group (tubes and cores, construction
products, protective packaging, adhesives) and Consumer Packaging
(folding cartons, set-up boxes, packaging services). Caraustar
serves the four principal recycled boxboard product end-use
segments: tubes and cores; folding cartons; gypsum facing paper;
and specialty paperboard products. The company is headquartered in
Austell, GA and is owned by H.I.G.
Capital.
Cautions Concerning Forward-Looking Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995
with respect to Greif's plans to acquire Caraustar and other
statements about future expectations, prospects, estimates and
other matters that are dependent upon future events or
developments. These forward-looking statements may be identified by
words such as "expect," "anticipate," "intend," "plan," "believe,"
"will," "should," "could," "would," "project," "continue,"
"likely," and similar expressions, and include statements
reflecting future results, trends or guidance and statements of
outlook. All forward-looking statements are based on assumptions,
expectations and other information currently available to
management. All forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ
materially from those forecasted, projected or anticipated, whether
expressed or implied. These risks and uncertainties include:
the ability to successfully complete the acquisition of Caraustar
on a timely basis, including receipt of required regulatory
approvals; the occurrence of any event, change or other
circumstance that could give rise to the termination of the
definitive agreement; the outcome of any legal proceedings that may
be instituted against the parties and others related to the
acquisition of Caraustar; the satisfaction of certain conditions to
the completion of the acquisition of Caraustar; the conditions of
the credit markets and Greif's ability to issue debt to fund the
acquisition on acceptable terms; if the acquisition of Caraustar is
completed, the ability to retain the acquired businesses' customers
and employees, the ability to successfully integrate the acquired
businesses into Greif's operations, and the ability to achieve the
expected synergies as well as accretion in margins, earnings or
cash flow; competitive pressures in Greif's various lines of
business; the risk of non-renewal or a default under one or more
key customer or supplier arrangements or changes to the terms of or
level of purchases under those arrangements; uncertainties with
respect to U.S. tax or trade laws; the effects of any investigation
or action by any regulatory authority; and changes in foreign
currency rates and the cost of commodities. Greif is subject
to additional risks and uncertainties described in its Form 10-K,
Form 10-Q and Form 8-K reports and exhibits to those reports. This
release reflects management's views as of December 20, 2018. Except to the extent required
by applicable law, Greif undertakes no obligation to update or
revise any forward-looking statement.
For more information, please refer to the contacts below:
Investors: Matt Eichmann, Vice
President, Investor Relations & Corporate Communications,
740-549-6067
Media / trade publications: Debbie
Crow, Director, Corporate Communications, 740-657-6992
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SOURCE Greif, Inc.