Graphic Packaging Holding Combines Businesses with Delta Natural Kraft, LLC

Combination creates North America's only vertically integrated multi-wall bag business Graphic Packaging owns 87% of combined business and will consolidate its results.

Dec 12 2011 --- Graphic Packaging Holding Company, a leading provider of packaging solutions to food, beverage and other consumer products companies, announced the combination of its multi-wall bag and specialty plastics packaging businesses with the kraft paper and multi-wall bag businesses of Delta Natural Kraft, LLC (DNK) and Mid-America Packaging, LLC (MAP), both wholly owned subsidiaries of Capital Five Investments, LLC (CVI).

"We are excited about combining our multi-wall bag and specialty plastics packaging assets with those of Delta Natural Kraft and Mid-America Packaging," said David Scheible, Graphic Packaging's president and chief executive officer. "The combined entity further strengthens our position as a provider of these products, while vertically integrating our converting assets with the kraft paper production capacity of Delta Natural Kraft. The combination will allow us to better serve our customers through the expanded operations, yield numerous synergy opportunities, and position us well for a rebound of the end markets served by these products. We are also pleased to have Mark Van Dame, chief executive officer of Delta Natural Kraft and Mid-America Packaging, and his leadership team join the Graphic Packaging family."

Under the terms of the transaction, Graphic Packaging formed a new limited liability company and contributed the assets of its multi-wall bag and specialty plastics packaging businesses and CVI contributed its ownership interests in DNK and MAP to the newly formed company. Neither party received cash consideration as part of the transaction. However, the new company assumed approximately $25 million in third party debt of DNK and MAP. Concurrent with the transaction, a majority of this assumed debt was repaid with the proceeds of an intercompany loan from Graphic Packaging. After the combination, Graphic Packaging owns approximately 87% of the new company and will consolidate its results of operations. The DNK and MAP businesses had annual revenues of approximately $150 million and the combination does not impact Graphic Packaging's net leverage ratio. The remaining 13% of the new company is owned by CVI.

The transaction was structured as a tax-free combination and will allow for tax efficient distribution of profits to the owners of the newly created entity.