Packaging Corporation of America (NYSE: PKG) and Boise (NYSE:
BZ) today announced that they have entered into a definitive
agreement under which PCA will acquire all of the outstanding
common shares of Boise for $12.55 per share in cash, for an
aggregate transaction value of $1.995 billion, inclusive of $714
million of outstanding indebtedness of Boise. The transaction is
expected to close in the fourth quarter of 2013 with committed debt
financing, but is subject to certain customary conditions and
regulatory approvals.
The combined companies generated $5.5 billion in sales and $879
million in EBITDA (excluding special items) in the last twelve
months ended June 30, 2013 (LTM). The combined packaging business
generated 75% of sales and 83% of EBITDA over the period, with the
remainder generated by Boise’s paper business.
PCA's containerboard capacity will increase to 3.7 million tons
from its current level of 2.6 million tons (a 42% increase)
including the announced expansion of paper machine number 2 (D2) at
Boise's DeRidder mill. PCA’s corrugated products volume will
increase by about 30% as a result of the acquisition, and PCA’s
market presence will expand into the Pacific Northwest.
Synergies are estimated to generate pre-tax benefits of
approximately $105 million and are expected to be fully realized
within three years of closing. The synergies are projected to come
from mill grade optimization, sales mix and cost reductions, lower
transportation costs, corrugated products optimization, and
SG&A cost reductions.
The purchase price represents a multiple of 6.7 times adjusted
LTM EBITDA of $297 million (excluding special items) and including
the $105 million in benefits from synergies, the purchase price
represents a multiple of 5.0 times LTM EBITDA. The acquisition is
expected to be accretive to earnings immediately.
PCA Executive Chairman Paul Stecko said, “The acquisition is an
excellent fit, both geographically and strategically, with unique
and substantial synergies. It provides the containerboard that PCA
needs to support our strong corrugated products growth. The
DeRidder containerboard mill is low cost, located in a very good
wood basket and, after the D2 machine conversion, provides almost
one million tons of primarily lightweight containerboard. The
combined company is expected to generate strong financial results
and strong cash flow which will be used to pay down debt as well as
to continue to return value to our shareholders.”
PCA Chief Executive Officer Mark Kowlzan added, “This
acquisition allows us to apply our operating and sales expertise
across a much larger system and provides significant growth
potential. We look forward to working with the employees of Boise
as we integrate our businesses. I am confident, that together, we
will achieve significant operating benefits.”
Boise Board Chair Carl Albert said, “Our Board and management
team have thoroughly evaluated a broad range of strategic options
for Boise, and we believe this transaction is the best way to
maximize value for our shareholders.”
Boise Chief Executive Officer Alexander Toeldte said, “PCA’s
desire to acquire Boise is a testament to the performance delivered
and dedication shown by our employees in our five years as a public
company, and the value we have created in a very challenging
economic environment. We have been committed to serving our
customers with distinction and this transaction will enhance
opportunities for even stronger customer service.”
Under the terms of the definitive agreement, an affiliate of PCA
is required to commence a tender offer to acquire all outstanding
shares of Boise’s common stock for $12.55 per share in cash. The
boards of directors of both Boise and PCA have unanimously approved
the agreement. Boise’s board of directors expects to recommend that
shareholders tender their shares into the offer once it is
launched. The tender offer is required to be commenced within 10
calendar days and to remain open for at least 20 business days
after launch. Any shares not tendered in the offer will be acquired
in a second step merger at the same cash price as in the tender
offer.
BofA Merrill Lynch acted as exclusive financial advisor to PCA
and provided committed financing for the transaction. J.P. Morgan
Securities LLC acted as exclusive financial advisor to Boise. Mayer
Brown LLP acted as legal counsel to PCA, and Skadden, Arps, Slate,
Meagher & Flom LLP acted as legal counsel to Boise.
Conference Call to Discuss Transaction
Paul T. Stecko, PCA’s Executive Chairman, Mark Kowlzan, PCA’s
Chief Executive Officer, and Rick West, PCA’s Chief Financial
Officer, will discuss the transaction during a conference call on
September 16, 2013 at 8:30am EDT.
Conference Call Information:
WHAT: Conference Call: PCA’s Acquisition of Boise
WHEN: Monday, September 16, 2013 8:30am Eastern Time NUMBER:
(866) 655-9758 (U.S. and Canada) or (973) 935-8718 (International)
Dial in by 8:15 a.m. Eastern Time Conference Call Leader: Paul
Stecko PASSCODE: 64775457 WEBCAST:
http://www.packagingcorp.com
Overview of PCA
Headquartered in Lake Forest, IL, PCA (NYSE: PKG) is the fourth
largest producer of containerboard and corrugated packaging
products in the United States with sales of $2.8 billion in 2012.
PCA operates four paper mills and 71 corrugated product plants in
26 states across the country.
Overview of Boise
Headquartered in Boise, Idaho, Boise Inc. (NYSE: BZ)
manufactures a wide variety of packaging and paper products.
Boise's range of packaging products includes linerboard and
corrugating medium, corrugated containers and sheets, and
protective packaging products. Boise's paper products include
imaging papers for the office and home, printing and converting
papers, and papers used in packaging, such as label and release
papers.
Tender Offer
This announcement is neither an offer to purchase nor a
solicitation of an offer to sell securities. The tender offer for
the outstanding shares of Boise’s common stock described in this
news release has not commenced. At the time the tender offer is
commenced, PCA will file or cause to be filed a Tender Offer
Statement on Schedule TO with the Securities and Exchange
Commission (SEC) and Boise will file a Solicitation/Recommendation
Statement on Schedule 14D-9 with the SEC related to the tender
offer. The Tender Offer Statement (including an Offer to Purchase,
a related Letter of Transmittal and other tender offer documents)
and the Solicitation/Recommendation Statement will contain
important information that should be read carefully before any
decision is made with respect to the tender offer. Those materials
will be made available to Boise’s stockholders at no expense to
them by the information agent for the tender offer, which will be
announced. In addition, all of those materials (and all other offer
documents filed with the SEC) will be available at no charge on the
SEC’s website at www.sec.gov.
Forward Looking Statements
Some of the statements in this press release are forward-looking
statements. Forward-looking statements include statements about our
future earnings and financial condition, our industry and our
business strategy. Statements that contain words such as “ will”,
“should”, “anticipate”, “believe”, “expect”, “intend”, “estimate”,
“hope” or similar expressions, are forward-looking statements.
These forward-looking statements are based on the current
expectations of PCA. Because forward-looking statements involve
inherent risks and uncertainties, the plans, actions and actual
results of PCA could differ materially. Among the factors that
could cause plans, actions and results to differ materially from
PCA’s current expectations include the following: the receipt of
regulatory approvals for the transaction and the successful
fulfillment or waiver of all other closing conditions without
unexpected delays or conditions; the failure to realize, or delays
in realizing, synergies and cost-savings from the transaction;
increases in interest rates; the impact of general economic
conditions and condition in the industries in which we operate,
including competition, product demand and product pricing, as well
as those identified under Item 1A. Risk Factors in PCA’s Annual
Report on Form 10-K for the year ended December 31, 2012 filed with
the Securities and Exchange Commission and available at the SEC’s
website at “www.sec.gov”.
Non-GAAP measures used in this press release are reconciled to
the most comparable measure reported in accordance with GAAP in the
schedules to this press release.
Packaging Corporation of
America
Reconciliation of Non-GAAP Financial
Measures (1)
Unaudited
Twelve Months Ended June 30,
2013
PCA
Boise
(in millions)
Corporate
Packaging
Paper
OH /
Elims
Total
As reported: Net sales $ 3,015.5 $ 1,160.6 $ 1,390.2 $ (49.4) $
2,501.4 EBIT $ 401.0 $ 86.5 $ 30.1 $ (31.9) $ 84.7
Depreciation, amortization, & depletion
171.9
63.4
97.0
4.4
164.8
EBITDA $ 572.9 $ 149.9 $ 127.1 $ (27.5) $ 249.5 Special
items: Plant closure charges (2) 2.0 - - - - Pension curtailment
charge (3) 7.8 - - - - Restructuring costs (4) - 1.0 - - 1.0 St.
Helens charges (5) - - 31.7 - 31.7
International Falls restructuring charges
(6)
- - 12.3
-
12.3
Transaction-related costs (7) - - - 2.0 2.0 Total special items
9.8
1.0
44.0
2.0
47.0
EBITDA excluding special items $
582.7
$
150.9
$ 171.1 $ (25.5) $ 296.5
Combined PCA and Boise
Corporate
Packaging
Paper
OH / Elims
Total
Net Sales $ 4,176.1 $ 1,390.2 $ (49.4) $ 5,516.9
EBITDA excluding special items $ 806.8 $ 171.1 $ (98.7) $ 879.2
Notes to
Reconciliation of Non-GAAP Financial Measures
(1) EBITDA and EBITDA excluding special items are non-GAAP
financial measures. The effect of special items are excluded as
management considers such items to be unusual in nature. Management
uses these measures to focus on on-going operations and believes
that it is useful to investors because it enables them to perform
meaningful comparisons of past and present operating results.
(2) Represents charges from plant closures.
(3) Represents a curtailment charge of $7.8 million related to
the Company’s hourly defined benefit plan.
(4) Represents restructuring costs of $1.0 million related to
Boise’s announced project to convert a paper machine at the
DeRidder, Louisiana paper mill to produce lightweight linerboard
and corrugating medium.
(5) Represents costs of $31.7 million in connection with ceasing
paper production at the one remaining paper machine at Boise’s St.
Helens, Oregon paper mill which was shut down in December 2012.
(6) Represents $12.3 million of restructuring costs to shut down
two paper machines and an off-machine coater at Boise’s
International Falls, Minnesota paper mill, in fourth quarter
2012
(7) Represents transaction-related costs including expenses
associated with transactions, whether consummated or not.
PCA CONTACT:Packaging Corporation of AmericaBarbara
SessionsINVESTOR RELATIONS: (877) 454-2509PCA’s Website:
www.packagingcorp.comorBOISE CONTACT:Boise Inc.Greg
JonesINVESTOR RELATIONS: (208) 384-7141Boise’s Website:
www.boiseinc.com
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