Monday, special purpose acquisition company Hicks Acquisition Company I, Inc. (TOH) announced that it has reached an agreement in principle with The Blackstone Group (BX) and the Graham Group, pursuant to which the company will acquire Graham Packaging Holdings Co through a transaction valued at approximately $3.2 billion. On completion of the transaction, subject to execution of a definitive agreement to be finalized in the next few days, Graham Packaging, a leading manufacturer of rigid plastic containers, will go public. The company expects to close the transaction later this year.
In connection with the transaction, the current stockholders of Graham Packaging will receive $350 million of cash held in trust, 35.0 million common shares, and 2.8 million warrants upon completion of the transaction. The purchase consideration includes a transfer of value to The Blackstone Group and the Graham Group of approximately 2.8 million Founder's shares and warrants. In exchange, the Hicks-led sponsor will retain, through a series of transactions, Earnout Units, the shares of which have a trigger price of $13.75 and the warrants of which will become exercisable at a strike price of $10.00 and a trigger price of $15.00.
Hicks Acquisition's existing public stockholders along with Hicks will own approximately 66% of Graham's common shares outstanding, while The Blackstone Group and the Graham Group will remain, in the aggregate, the company's largest shareholder, with approximately 34% of the common shares outstanding.
Blackstone has agreed it will maintain the largest ownership stake for at least two years as it continues to play an important role in guiding the company strategically and operationally.
The existing management team, including Chairman and CEO Warren Knowlton and COO/CFO Mark Burgess, will continue to lead the company. Completion of the transaction is subject to expiration or early termination of the applicable Hart-Scott-Rodino waiting period, Hicks Acquisition stockholder approval and other customary closing conditions.
The transaction has been structured to preserve Graham Packaging's existing capital structure and does not breach, or result in a default under, the company's existing credit facilities or constitute a "change of control" under the indentures of the company's existing senior and senior subordinated notes issues.
Hicks Acquisition said following the completion of the transaction, the combined enterprise will be renamed Graham Packaging Company and will apply for listing on the New York Stock Exchange.
Warren Knowlton, CEO of Graham Packaging, said, "Graham Packaging has made significant progress since December 2006. With the support of our new ownership group and our strong free cash flow from operations, we will continue to invest in and grow our business, pay down debt, accelerate our earnings growth, and meet the needs and expectations of our employees, customers, suppliers and stockholders."
The company provides valued-added custom plastic containers to many of the world's leading consumer product companies, including, among others, PepsiCo, Coca-Cola, Danone/Dannon, Ocean Spray, Heinz, Abbott, Arizona Beverages, Nestlé/Gerber, Anheuser-Busch, SAB Miller, Procter & Gamble, Unilever, Church & Dwight, Dial/Henkel, Clorox and Colgate.
Hicks Acquisition closed Monday's regular trading at $9.29, while Blackstone Group closed at $18.21, down $0.52 or 2.78%.
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