Canadian Packaging

Silgan agrees to purchase Graham Packaging

Merger to create premiere food and specialty beverage packaging company.


April 13, 2011
by Canadian Packaging Staff

Headquartered in Stamford, CT., Silgan Holdings Inc.,  a leading supplier of rigid consumer goods packaging products, has announced it has agreed to acquire the York, PA-based Graham Packaging Company Inc., a leading global supplier of value-added rigid plastic containers for the food, specialty beverage and consumer products markets.

“This acquisition creates the premier Food and Specialty Beverage packaging company, allowing Silgan to significantly broaden its ability to serve these important markets with multiple rigid packaging options,” says Tony Allott, Silgan’s president and chief executive officer. “Graham Packaging is a differentiated plastic packaging franchise with deep customer relationships and a strong track record for innovation. In combination, we anticipate building enhanced relationships with global customers in our target end markets.”

Per the agreement, Graham shareholders will receive 0.402 shares of Silgan common stock and US$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 percent.

The combined company has annual sales of over $6.2 billion, and its over 17,000 employees will operate 180 manufacturing facilities in 19 countries.

Highlights of the transaction:

  • Market Focus: Following the transaction, Silgan will be a world leader in food and specialty beverage packaging, with combined revenues of approximately US$4.6 billion serving these end markets which are characterized by stable demand with large, growing multinational customers;
  • Financial Impact: Silgan expects the transaction to be accretive to earnings and cash flow per share in the first full year. Following the acquisition, on a pro forma basis Silgan expects to generate approximately US$500 million in free cash flow, or approximately US$5 per share, in the first full year of operations;
  • Committed Debt Financing: Pro forma for the transaction, Silgan’s leverage ratio will be approximately four times, which is consistent with past levels at Silgan. The transaction is supported by committed financing, with the permanent capital structure expected to consist of an optimal mix of bank facilities and bonds. Silgan has a longstanding track record of successfully operating with moderate levels of leverage, allowing for very attractive levered returns to shareholders;
  • Synergies: Silgan expects to realize operational cost synergies of US$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 currently 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.

About Silgan Holdings

Silgan Holdings is a leading manufacturer of consumer goods packaging products with annual net sales of approximately $3.1 billion in 2010. Silgan operates 83 manufacturing facilities in North and South America, Europe and Asia. Silgan is a leading supplier of metal containers in North America and Europe, and a leading worldwide supplier of metal, composite and plastic vacuum closures for food and beverage products. In addition, Silgan is a leading supplier of plastic containers for personal care products in North America.
For more information, visit www.silganholdings.com.

About Graham Packaging

Graham Packaging is a leading U.S. supplier of plastic containers for hot-fill juice and juice drinks, sports drinks, drinkable yogurt and smoothies, nutritional supplements, wide-mouth food, dressings, condiments and beers; a leading global supplier of plastic containers for yogurt drinks; a leading supplier of plastic containers for liquid fabric care products, dish care products and hard-surface cleaners; and a leading supplier in the U.S., Canada and Brazil of one-quart/liter plastic motor oil containers. Graham employs over 8,100 associates in 15 countries through 97 manufacturing facilities.
For more information, visit www.grahampackaging.com.






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