Silgan buying Graham Packaging in $1.28B deal

AP News
Posted: Apr 13, 2011 3:12 PM
Silgan buying Graham Packaging in $1.28B deal

Consumer packaging maker Silgan Holdings Inc. said Wednesday it will acquire Graham Packaging Co. in a cash-and-stock deal valued at $1.28 billion.

The companies say the deal will save on costs and create a stronger force in packaging for beverage, food and consumer products ranging from sports drinks and beer to personal care products and motor oil.

Silgan said it will have 17,000 employees and 180 manufacturing plants in 19 countries once the deal is completed. It expects the combined company will achieve $50 million in cost savings by the third year after the sale closes.

Graham is based in York, Pa., and makes plastic containers for juices, sport and yogurt drinks, nutritional supplements, condiments, dressings, and beers. It also makes quart bottles for motor oil. Silgan makes containers for food and drinks and personal care products, with a specialty in metal cans.

The boards of both companies have approved the deal. Investment firm Blackstone Capital Partners and the Graham family, which own a combined 65 percent of Graham shares, will vote for the deal.

The companies expect the sale to close in the third quarter if regulators and shareholders approve.

Silgan is offering 0.402 shares and $4.75 in cash for each Graham share, valuing the company at $19.56 per share. That's a premium of 17.1 percent to Tuesday's closing price.

Graham shares rose $2.54, or 15.2 percent, to $19.25 in premarket trading. They have traded between $10.32 and $18.07 in the last year. Silgan shares gained $2.02, or 5.5 percent, to $38.85 ahead of the market open.

Silgan, of Stamford, Conn., said the deal is worth $4.1 billion including debt.

Standard & Poor's Rating Service lowered its credit outlook for Silgan to negative because the acquisition will increase the debt the company is carrying. That means it might lower the company's credit rating if the acquisition closes.

Silgan had $3.07 billion in revenue in 2010, and Graham reported $2.51 billion. Silgan said Graham's annual sales are about $2.8 billion including its recent acquisition of Liquid Container.

Blackstone and the Grahams will receive a $245 million payment because the company is changing hands. Graham Packaging said that agreement was made before the company went public in February 2010.

Silgan said its co-chairmen, who own 29 percent of its stock combined, will vote in favor of the deal.

Graham Packaging's IPO just over a year ago raised $166.7 million, about half what the company had hoped, after Blackstone and the Graham family decided not to sell their shares.