Merger creates US$6 billion integrated paper-based packaging company

A partnership between Graphic Packaging Holding Company and International Paper's North America consumer packaging business will result in a $6 billion integrated paper-based packaging company.

Graphic Packaging will be the sole operator owning 79.5% of the partnership, while International Paper will own the remainder, which is the equivalent of US$1.14 billion. The partnership will assume International Paper's debt of US$660 million, and Graphic Packaging stated their current Board of Directors and leadership team would remain the same.

Valued at US$1.8 billion, International Paper produces solid bleached sulfate paperboard and paper-based foodservice products. The business has two SBS mills located in Augusta, Georgia, and Texarkana, Texas, with annual production capacity of 1.2 million tonnes of SBS, and three converting facilities in the US and one in the UK. It has the capacity to convert 250,000 tonnes of SBS paperboard into over 24 billion units of paper-based cups and cylindrical containers.

In 2017, it is forecast that the business will generate adjusted earnings before interest, taxes, depreciation and amortisation of US$210 million.

According to the two companies, the deal is projected to be accretive to earnings in its first year and they have set a target of US$75 million in synergies by the end of year three.

"We are excited about the platform for future growth created by this combination. We expect the transaction will significantly increase our mill production and converting scale, meaningfully increase our exposure to the growing foodservice market, provide significant runway to realise synergies and drive strong financial results," said Graphic Packaging President and CEO Michael Doss.

"The [US]$75 million in synergies is compelling and will be driven by cost reductions, increased paperboard integration and procurement and mill efficiencies."

The transaction is expected to close in early 2018.