Graphic Packaging to Create a $6 Billion Integrated Paper-Based Packaging Company by Combining with International Paper’s North America Consumer Packaging Business

Highlights
Graphic Packaging will create a leading integrated paper-based packaging company with approximately $6 billion of revenue and $1 billion of EBITDA post-synergies
Expands existing and builds new platforms for integrated growth in SBS foodservice markets and folding carton converting
International Paper Company’s North America Consumer Packaging business valued at $1.8 billion
Targeting $75 million in synergies by the end of year three
Valuation of 8.6x Adjusted EBITDA and 6.3x Adjusted EBITDA post-synergies based on $210 million of Adjusted 2017 Estimated EBITDA
Projected to be accretive to earnings in year one
Transaction structured as a new partnership comprised of Graphic Packaging’s existing businesses and International Paper Company’s North America Consumer Packaging business. Graphic Packaging Holding Company will own 79.5 percent of the partnership and will be the sole operator. International Paper will own 20.5 percent of the partnership
No change to Graphic Packaging’s current Board of Directors or leadership team

Graphic Packaging Holding Company (NYSE: GPK) will create a $6 billion paper-based packaging company by forming a new partnership comprised of Graphic Packaging’s existing businesses and International Paper’s (NYSE: IP) North America Consumer Packaging business. Graphic Packaging Holding Company will own 79.5 percent of the partnership and will be the sole operator. International Paper will own 20.5 percent of the partnership, equivalent to a $1.14 billion value. The partnership will assume $660 million of International Paper debt. There will be no change to Graphic Packaging’s current Board of Directors or leadership team.

The transaction will be completed at a compelling EV/Adjusted EBITDA multiple of 8.6x, pre-synergies, and 6.3x, post-synergies. International Paper will have a 2-year lock-up on the monetization of their partnership interest and cannot purchase GPK shares for a period of 5 years, subject to limited exceptions.

International Paper’s North America Consumer Packaging business is a $1.6 billion revenue leading producer of solid bleached sulfate (SBS) paperboard and paper-based foodservice products globally. The business includes two SBS mills located in Augusta, Georgia and Texarkana, Texas with annual production capacity of 1.2 million tons of SBS, three converting facilities in the U.S. and one in the U.K., with the capacity to convert 250,000 tons of SBS paperboard into over 24 billion units of paper-based cups and cylindrical containers. The business is projected to generate Adjusted EBITDA of $210 million in 2017.

“We are excited about the platform for future growth created by this combination,” said President and CEO Michael Doss. “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 realize synergies, and drive strong financial results.”

“The $75 million in synergies is compelling and will be driven by cost reductions, increased paperboard integration, and procurement and mill efficiencies.”

The transaction has been approved by the Board of Directors of both companies. The transaction is subject to standard closing requirements and regulatory review and is expected to close in early 2018.

Graphic Packaging’s financial adviser was BofA Merrill Lynch and Alston & Bird LLP acted as legal counsel.
http://investors.graphicpkg.com/investor-relations/press-releases/press-release-details/2017/Graphic-Packaging-to-Create-a-6-Billion-Integrated-Paper-Based-Packaging-Company-by-Combining-with-International-Papers-North-America-Consumer-Packaging-Business/default.aspx

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