Reynolds Group to buy Graham Packaging for $1.68B

AP News
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Posted: Jun 17, 2011 10:20 AM
Reynolds Group to buy Graham Packaging for $1.68B

Container maker Graham Packaging Company Inc. is being purchased by New Zealand's Reynolds Group Holdings Ltd. for about $1.68 billion, after rival bidder Silgan Holdings Inc. failed to come up with a better offer.

Graham, based in York, Pa., had told Silgan on Monday that it planned to accept Reynolds' bid of $25.50 a share, saying that it was superior to Silgan's offer.

Reynolds, which makes Reynolds Wrap aluminum foil, had initially offered $25 per share for Graham, maker of containers for items such as salsa, chocolate syrup and laundry detergent.

Stamford, Conn.-based Silgan had until the end of Thursday to make a better offer for Graham. In April, the maker of shampoo bottles, bottle caps and other packaging products had offered a cash-and-stock deal that was worth $19.56 per share at the time.

Graham said Friday it had signed a definitive buyout agreement with Reynolds. Silgan is entitled to receive a $39.5 million breakup fee, however.

Graham's stock fell 55 cents, or 2.1 percent, to $25.18 in morning trading Friday. Over the past year, the shares have traded in a range of $10.32 to $26.40. Shares of Silgan gained 64 cents, or 1.6 percent, to $39.50.

Reynolds plans to pay for the acquisition with available cash and fully committed financing. The company says the acquisition provides "strategic benefits" and cost savings.

Graham said the deal with Reynolds is valued at approximately $4.5 billion, including debt.

Controlling shareholders Blackstone Capital Partners III Merchant Banking Fund LP, Blackstone Offshore Capital Partners III LP and Blackstone Family Investment Partnership III LP have given written consent to approve the transaction, which Graham needed for the transaction. No further action is necessary by other Graham stockholders.

The deal does not need approval from Reynolds' shareholders.

Reynolds said it agreed to raise its offer price on the condition that Graham agreed to shorten the amount of time after which it could end the deal if Graham's controlling shareholders did not approve the transaction by written consent.

The buyout, which was unanimously approved by Graham's board, is expected to close in the second half of the year.