Reynolds Group Holdings Limited ("Reynolds Group") has announced that it has entered into a merger agreement, and an amendment thereto, to acquire all of the outstanding shares of Graham Packaging Company Inc. ("Graham"). Reynolds Group will pay $25.50 in cash for each share of Graham common stock.
Reynolds Group Holdings Limited ("Reynolds Group") has announced that it has entered into a merger agreement, and an amendment thereto, to acquire all of the outstanding shares of Graham Packaging Company Inc. ("Graham"). Reynolds Group will pay $25.50 in cash for each share of Graham common stock. The amendment increased the merger consideration to $25.50 in cash per share (from $25.00 per share) in consideration for Graham agreeing to materially shorten the time period after which Reynolds Group could terminate the agreement if Graham's controlling stockholders failed to approve the merger by written consent. Funds affiliated with Blackstone, holding a majority of the outstanding common stock of Graham, did irrevocably consent in writing to the transaction following execution of the amendment and consequently, no further Graham stockholder approval of the merger is required.
The price to be paid pursuant to the merger agreement amendment represents a total enterprise value, including net debt, of approximately $4.5 billion. Graham is a leading global supplier of value-added rigid plastic containers for the food, specialty beverage and consumer products markets. The transaction is expected to close in the second half of 2011 and is subject to customary regulatory approvals and closing conditions.
Reynolds Group expects to finance the purchase price and associated transaction costs with new indebtedness of up to $5 billion and existing cash on hand. The transaction is supported by fully committed financing.
Reynolds Group expects to realize strategic benefits and operational cost synergies as a result of the combination. These synergies will be achieved primarily through reductions in administrative expenses, procurement savings and logistics efficiencies.
Pro forma for the transaction, Reynolds Group's leverage ratio is expected to increase by approximately 0.5 times Pro Forma Adjusted EBITDA. Reynolds Group has a longstanding track record of deleveraging following the successful integration of acquisitions.
As part of the transaction, Reynolds Group intends to repay Graham's existing credit facilities. Reynolds Group has not made a decision as to whether it will retire Graham's existing senior unsecured notes and senior subordinated notes. To the extent these notes remain outstanding after the acquisition, Graham will be required to make a change of control offer.
There can be no assurance that the acquisition of Graham will be completed or that the expected strategic benefits and operational cost synergies will be achieved.
Source: Reynolds Group Holdings Limited
