Sector News

Graphic Packaging to acquire AR Packaging in US$1.45B fiber-based mega-deal

May 16, 2021
Chemical Value Chain

Graphic Packaging has agreed to acquire AR Packaging, reportedly Europe’s second largest producer of fiber-based consumer packaging, for approximately US$1.45 billion in cash.

The mega-deal is expected to close in four to six months, subject to customary adjustments.

“Acquiring AR Packaging will result in significant value creation opportunities for our customers, our employees, and our stockholders as we bring together two leading providers of fiber-based consumer packaging solutions,” says Michael Doss, Graphic Packaging’s president and CEO.

AR Packaging’s 25 converting facilities across Eastern and Western Europe provide “significant scale and cost efficiency benefits,” Doss maintains, strengthening its combined presence and ability to service European and global customers.

Fiber-based frenzy
Graphic Packaging’s agreed acquisition of AR Packaging is expected to add US$1.1 billion in annual sales and US$160 million in annual adjusted EBITDA to the company.

In addition, the combination is expected to drive total synergies of US$40 million over 36 months following the close. The deal is expected to be immediately accretive to the Graphic Packaging’s earnings per share and cash flow.

The acquisition serves as an example of the growing “Fiber-Based Frenzy,” as identified in Innova Market Insights top packaging trends for 2021. Innovation in plastic-replacement fiber-based solutions is booming as brands explore plastic waste escape routes and new connections with the enlarging eco-conscious consumer base.

According to Innova Market Insights’ 2021 survey, 48 percent of European consumers regard packaging’s recyclability as a significant sustainability credential, equal with reusability (also 48 percent).

Meanwhile, 73 percent of European consumers recognize paper’s “good” or “exceptional” recyclability.

“The ability to leverage beneficial value chain integration, from paperboard manufacturing to carton converting, provides increased possibilities to offer sustainably optimized solutions to our customers,” AR Packaging’s president and CEO Harald Schulz comments on the news.

Graphic Packaging is taking the majority stake in AR Packaging shortly after its acquisition of Americraft Carton, a US-based paperboard packaging and carton company.

The follow up move expands Graphic Packaging’s opportunities to “grow in markets around the world,” says CFO Stephen Scherger.

PackagingInsights spoke with both Graphic Packaging and AR Packaging in video interviews about their latest fiber-based food packaging innovations during last year’s Pack Expo Connect virtual event.

Both parties are innovating in fruits and vegetable paperboard punnets, while Graphic Packaging also recently launched paperboard multipack carriers for PET bottles.

Factoring in sustainability
The combination of the two fiber packaging companies empowers Graphic Packaging to “consistently deliver organic sales growth,” adds Scherger. The company is aiming for the high end of its 100 to 200 basis points goal as outlined in its Sustainability Vision 2025 goals.

These goals include reducing greenhouse gas emissions, non-renewable energy use and mill water effluent each by 15 percent. The company further strives to reduce waste from all its operations, make all its products recyclable and reduce LDPE use by 40 percent.

“Notably, the lean operating models executed by both organizations, coupled with our complementary market segments, provide compelling financial benefits,” Scherger continues.

“The significant cash flow generation capability of the combination will drive strong returns and is expected to return Graphic Packaging to our long-term 2.5-3.0x target leverage range within 24 months following close.”

BofA Securities is serving as financial advisor and DLA Piper is serving as legal counsel to Graphic Packaging. Credit Suisse International is serving as financial advisor and Roschier is serving as legal counsel to AR Packaging.

By Anni Schleicher


comments closed

Related News

January 23, 2022

Eastman invests US$1B in world’s largest molecular plastics recycling facility in France

Chemical Value Chain

Eastman is investing up to US$1 billion in building what it says is the world’s largest molecular plastics recycling facility in France. The new facility would use Eastman’s polyester renewal technology to recycle up to 160,000 metric tons of hard-to-recycle plastic waste annually – enough plastic waste to fill Stade de France national football stadium 2.5 times.

January 23, 2022

LG Energy Solution opens books for South Korea’s largest IPO at up to $10.8 bln

Chemical Value Chain

Korean battery maker LG Energy Solution has opened the books to investors to raise up to $10.8 billion in the country’s largest initial public offering (IPO), according to a term sheet seen by Reuters. The shares will be sold in a price range of 257,000 won to 300,000 won ($216.19-$252.36) apiece to raise between $9.2 billion and $10.8 billion, the term sheet showed.

January 23, 2022

SHYNE, the largest consortium to promote renewable hydrogen in Spain, is born

Chemical Value Chain

The SHYNE (Spanish Hydrogen Network) project is the largest multisectoral consortium in Spain, created to promote the decarbonization of the economy through renewable hydrogen. SHYNE will have a total investment of €3.23 billion euros that will serve to develop more competitive technologies and evolve both the Spanish industry and its infrastructure towards decarbonization, generating more than 13,000 jobs.

Send this to a friend