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It's a packaging merger for the ages as Silgan Holdings Inc. announced it has entered into a definitive agreement to acquire Graham Packaging Company Inc., one of the world's 3 largest blowmolders of plastics packaging. Silgan controls about 50% of the North American metal food container market, and also makes composite, glass and plastics packaging.

PlasticsToday Staff

April 13, 2011

2 Min Read
Plastics packaging mega-merger as Silgan buys Graham Packaging

It's a packaging merger for the ages as Silgan Holdings Inc. announced it has entered into a definitive agreement to acquire Graham Packaging Company Inc., one of the world's 3 largest blowmolders of plastics packaging. Silgan controls about 50% of the North American metal food container market, and also makes composite, glass and plastics packaging. 

Silgan is headquartered in Stamford, CT and operates 83 facilities in the Americas, Europe and Asia. Graham Packaging (York, PA) operates almost 100 facilities in the same regions, processing polypropylene, polyethylene and polyethylene terephthalate. The processor last reported its earnings on Feb.10, 2011, at $0.75 earnings per share (EPS) for the previous quarter, and quarterly revenue was up 20.4% on a year-over-year basis. Silgan entered the plastics container market in 1987 and realized sales of $588.6 million of these in 2010.

Pursuant to the merger agreement, Graham shareholders will receive 0.402 shares of Silgan common stock and $4.75 in cash for each share of Graham common stock, representing a total enterprise value, including net debt, of approximately $4.1 billion. Based on Silgan's closing stock price on April 12, 2011, the transaction implies a value of $19.56 per Graham share, representing a premium over the closing price of Graham's stock on April 12, 2011 of approximately 17%.

The combined company will have annual sales exceeding $6.2 billion, with more than 17,000 employees at 180 manufacturing facilities in 19 countries. The purchase will make Silgan a world leader in food and specialty beverage packaging, with combined revenues of approximately $4.6 billion in that space.

In its press release on the deal, Silgan said it expects to realize operational cost synergies of $50 million by the third year following the combination. These synergies will be achieved primarily through reductions in administrative expenses, procurement savings and a more efficient manufacturing cost structure.

The acquisition is expected to close in the third quarter of 2011, subject to the approval of the transaction by Silgan's shareholders and Graham's shareholders, receipt of applicable regulatory approvals and the satisfaction of customary closing conditions. Blackstone Capital Partners III L.P. and certain of its affiliates and the Graham Family, who collectively own, on a fully diluted basis, 65% of Graham's common shares, have agreed to vote in favor of the transaction.

For those who enjoy a bit of schadenfreude, it's worth noting that on April 12, the day before the acquisition was announced, Zacks Investment Research put Graham Packaging on its "sell" list.

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