Graphic Packaging offloads US paperboard manufacturing plant in big money deal

22 Feb 2024 --- Graphic Packaging has announced the sale of its Augusta, US, bleached paperboard manufacturing facility to Clearwater Paper for US$700 million. The buyer calls this a strategic move aimed at bolstering its position in the paperboard manufacturing sector.

The deal, based on an Adjusted EBITDA of approximately US$100 million, underscores Graphic Packaging’s commitment to optimizing its portfolio while enabling Clearwater Paper to fortify its presence as a premier supplier in the North American market.

Graphic Packaging’s president and CEO, Michael Doss, highlights the significance of the transaction, stating: “Augusta is an outstanding asset with a great team, which we concluded is a more compelling fit with Clearwater Paper’s strategic growth plans than our own.”

“Bleached paperboard plays a major role in sustainable consumer packaging, and we will continue to service growing foodservice and packaging demand with bleached paperboard from our Texarkana facility.”

Meanwhile, the acquisition aligns with Clearwater Paper’s long-term strategy to expand its paperboard business and enhance its offerings to customers. 

“Augusta is a great fit with our strategy and improves our position as a premier, independent paperboard supplier to North American converters,” says Arsen Kitch, CEO of Clearwater Paper.

The packaging industry is undergoing a consolidation period as companies grapple with headwinds.The transaction, subject to regulatory approvals, is expected to close in the second quarter of 2024.

Industry shake up
The sale of the Augusta facility reflects strategic optimization by Graphic Packaging and Clearwater Paper amid a broader industry trend toward consolidation as companies seek to navigate challenging market dynamics and enhance their competitive positions.

Berry Global recently agreed to a US$3.6 billion merger with Glatfelter to expand its presence in healthcare and hygiene. Mondi has also confirmed a potential €11.7 billion (US$12.6 billion) merger with DS Smith.

In January, Wendel sold Constantia Flexibles to One Rock Partners, with Constantia subsequently acquiring approximately 57% of shares in packaging producer Aluflexpack earlier this month.

Toward the end of last year, paper and corrugated packaging sector giants Smurfit Kappa and WestRock merged. Analysts anticipate this merger will advance circularity, recyclability and decarbonization standards across America.

Packaging Insights spoke to Natasha Valeeva, senior analyst for Packaging & Logistics at Rabobank, who explained that the packaging market is going through a consolidation period.

“The paper packaging sector is still dealing with challenging demand conditions and lower prices globally. Most companies report declining sales and lower margins. In such market conditions, the rationale for consolidation is getting stronger. For example, new geographies, portfolios and efficiency improvements might help protect margins,” she explained.

By Radhika Sikaria