Graham Packaging Co., Inc. (GRM) agreed Friday to be acquired by New Zealand billionaire Graeme Hart's packaging company Reynolds Group Holdings Ltd. for about $4.5 billion in cash, including assumed debt.
Reynolds sweetened an earlier offer to $25.50 per share, prompting Graham Packaging to terminate its recent merger agreement with Stamford, Connecticut-based Silgan Holdings (SLGN).
Connecticut-based Silgan had agreed in April to acquire Graham in a cash and stock deal valued at about $19.56 per share, or about $4.1 billion, including a reported net debt of $2.8 billion.
However, Reynolds Group trumped Silgan on Tuesday, giving Silgan three days to match the offer. Silgan balked, taking a $39.5 million termination fee as per the terms of their merger agreement.
The deal, which has the unanimously approval of Graham's board, is expected to close in the second half of 2011.
The Reynolds Group merger consideration was increased to $25.50 per share in cash from the agreed $25.00 in consideration for Graham agreeing to materially shorten the time period for delivery of Blackstone's written consent approving the merger.
York, Pennsylvania-based Graham Packaging noted that no approval by Reynolds stockholders is required for the deal, and also no further Graham stockholder approval is required as funds affiliated with Blackstone have executed a written consent to approve the transaction.
Graham Packaging is a provider of blow molded plastic containers and bottles for consumer products. Private equity firm Blackstone Capital Partners III L.P. and certain of its affiliates own 61.3 percent of Graham's common shares.
Reynolds Group, which makes consumer food packaging products including Reynolds Wrap aluminum foil, is a wholly-owned subsidiary of Hart's private investment firm Rank Group Ltd.
Reynolds intends to fund the deal with new debt of up to $5 billion and existing cash on hand. The company said the transaction is supported by fully committed financing.
Reynolds Group intends to repay Graham's existing credit facilities as part of the transaction. However, the company said it has not yet decided as to whether it will retire Graham's existing senior unsecured notes and senior subordinated notes.
As part of Hart's consolidation in the packaging industry, Reynolds Group acquired in mid-November hefty bag maker Pactiv Corp. for $4.5 billion. In May, Reynolds Group acquired Cascades Inc.'s (CAS.TO, CADNF.PK) Dopaco Inc., its converting business for the quick-service restaurant industry, for $400 million in cash.
In Friday's regular trading session, GRM is currently trading at $25.19, down $0.54 or 2.10 percent on a volume of 12.38 million shares, while SLGN is trading at $39.65, up $0.78 or 2.02 percent on a volume of 0.89 million shares.
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