US-based Graphic Packaging has combined its multiwall bag and speciality plastics packaging business with the kraft paper and multiwall bag units of Delta Natural Kraft and Mid-America Packaging, both wholly owned subsidiaries of Capital Five Investments.
Graphic said the merger will not impact its net leverage ratio. The company will own 87% of the new entity while the remainder will be owned by Capital Five Investments.
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By GlobalDataThe company claims that the new firm will be North America’s only vertically integrated multiwall bag business.
The move is expected to yield $20-25m in synergy opportunities, which may contribute to Graphic’s earnings by 2013.
Neither party received cash consideration as part of the transaction, although a debt of $25m held by Delta Natural Kraft and Mid-America Packaging was settled using funds from Graphic Packaging.
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.
Graphic Packaging posted sales of approximately $3.2bn in the first nine months of 2011, up 2% compared to the corresponding period in 2010.
During the period it posted profits of about $11m after losing almost $9m in the year-ago period.
Delta Natural Kraft and Mid-America Packaging have annual revenues of approximately $150m.
