Lake Forest, Illinois based Packaging Corporation of America (PCA) announced that it has entered into a definitive agreement to purchase the containerboard business of Greif, Inc. for $1.8 billion in cash. The transaction is expected to close by the end of PCA’s third quarter, subject to certain customary conditions and regulatory approvals.
The Greif containerboard business includes two containerboard mills with approximately 800,000 tons of production capacity and eight sheet feeder and corrugated plants located across the United States. The business generated approximately $1.2 billion in sales and $212 million of earnings before interest, taxes, depreciation and amortization (EBITDA) for the 12 months ended April 30.
Synergies are estimated to generate pre-tax benefits of approximately $60 million and are expected to be fully realized within two years after closing. The synergies are projected to come from improved operational and production capabilities and efficiencies at the mills, increased integration, mill grade optimization and lower transportation costs. Approximately one half of the benefits are expected by the end of the first year with the remainder being received by the end of the second year.
PCA is expected to finance the transaction with $1.5 billion of new debt and cash on hand. PCA’s pro forma leverage ratio (net debt to EBITDA) will be approximately 1.7X after completion of the transaction.
PCA CEO Mark Kowlzan said, “This acquisition furthers PCA’s profitable growth strategy. The mills nicely complement PCA’s system and will provide containerboard to support PCA’s continued corrugated products growth. We expect to achieve significant synergies with minimal capital investment through our operational expertise and will identify even more opportunities within the combined system for future high return investments to grow with our corrugated and sheet feeder customers. We will continue to generate significant cash flows and value for our shareholders.”
“We have a great deal of respect for Greif and are very pleased to have reached agreement to acquire this business,” said PCA President Tom Hassfurther. “Greif’s people have developed deep and lasting relationships with their customers, who we look forward to serving with Greif’s well capitalized facilities. It is a very strong cultural fit with us in terms of safety, innovation, growth, and dedication to serving the needs of customers. We will apply the sales, customer service and operational expertise of the combined organization to even better serve our corrugated and sheet feeder customers and achieve additional growth and profitability.”
BofA Securities provided financial advice to PCA and provided committed financing for the transaction.
PCA says it is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America. PCA operates eight mills and 86 corrugated products plants and related facilities. They have approximately 15,400 employees, with operates within the United States.
In 2024, PCA produced about 294 billion square feet (BSF) of containerboard and shipped 67 BSF of corrugated products. Visit packagingcorp.com.
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