Delaware-based Greif, Inc. (NYSE: GEF, GEF.B), a global leader in industrial packaging products and services, announced Thursday 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 12 months ended Sept. 30, Caraustar generated sales of $1.4 billion and EBITDA of $174 million. Based on trailing 12 month actual volume, adjusted for current market conditions as of Sept. 30, 2018, the run-rate EBITDA is $220 million.
“Caraustar offers an exceptional strategic and cultural fit for Greif,” said Greif 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 (Thursday) 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.
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.
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.
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