Packaging materials maker Sonoco Products Co. (SON) agreed Monday to acquire peer Tegrant Corp. from private equity firm Metalmark Capital for $550 million in an all-cash deal that is the largest in its history. The final consideration for the acquisition, which is expected to close next month, is subject to a normal adjustment of net working capital.
"The addition of Tegrant and its family of businesses significantly advances Sonoco as a protective packaging solutions leader and greatly expands the products, services and capabilities we can offer our customers," Sonoco Chairman and CEO Harris DeLoach, Jr. said in a statement.
Hartsville, South Carolina-based Sonoco noted that the combination will create a North American leader in protective packaging. The combined company is expected to generate sales of about $5.0 billion in fiscal 2012, with Tegrant projected to generate about $440 million in fiscal 2011.
Tegrant is a leading provider of highly engineered protective, temperature-assured and retail security packaging solutions. It operates under three strategic business brands, Protexic, ThermoSafe and Alloyd.
Sonoco noted that the acquisition will see it gain immediate access to faster growing markets such as medical devices, pharmaceuticals, and health and beauty, while providing us expanded access to a variety of industrial components and automotive markets.
Following the closure of the deal, Tegrant President and CEO Ron Leach has agreed to stay with Sonoco and continue to lead Tegrant's businesses. Meanwhile, John Colyer, Sonoco's vice president, Global Industrial Converting, will lead the combined Sonoco Protective Packaging businesses.
Sonoco said the deal is expected to be accretive to its 2012 pro forma earnings by about $0.10 per share, including estimated adjustments for purchase accounting and about $11 million of expected synergies, when fully realized.
Sonoco expects to finance the deal from existing cash and debt, and said it plans to reduce its incremental debt using free cash flow over the next few years.
Metalmark Capital is an investment center of Citi Capital Advisors, and was established by the principals of Morgan Stanley Capital Partners (MSCP) to manage the Metalmark Capital and MSCP funds.
SON closed Friday's regular trading session at $28.78, down $0.21 on a volume of 0.75 million shares.
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