Berry Global Group Inc. and Glatfelter Corp. announced Wednesday that Berry would spin-off and merge most of its health, hygiene and specialties segment, including its global nonwovens and films business, with Glatfelter, a transaction which values the combined company at $3.6 billion on an enterprise value basis.
Evansville, Ind.-based Berry is expected to receive net cash proceeds of about $1 billion, which it will use to repay existing debt.
Closing is expected in the second half of 2024 if the deal clears regulators and Glatfelter shareholders. No vote of Berry’s stockholders is required.
Before closing, Charlotte, N.C.-based Glatfelter aims to complete a reverse stock split of all of its issued and outstanding common stock, a ratio which will be determined by Glatfelter and Berry closer to the closing date.
The parties claim the new entity will create a leading, publicly-traded company in the specialty materials industry with revenue of about $3.6 billion and EBITDA of around $455 million.
This past August, Bloomberg reported that Berry was weighing options for its nonwoven fabrics business, including a possible sale that could fetch as much as $2 billion, citing sources.
Citigroup Global Markets Inc. and Wells Fargo are financial advisors to Berry, which used Bryan Cave Leighton Paisner as outside counsel (including Lou Spelios).
The new company obtained committed financing from Citigroup and Wells Fargo Bank. It expects to raise permanent debt financing by transaction close that will result in net leverage of about 4 times, including Glatfelter’s $500 million 4.75% senior notes due 2029 anticipated to remain outstanding.
The new publicly traded company, which will be renamed and rebranded by transaction close, will be led by Curt Begle, Berry’s president of health, hygiene and specialties segment, who will be CEO.
Berry shareholders will own 90 percent of the combined company’s common shares when the deal closes while Glatfelter stockholders will own the remainder. The board of the combined company will initially be made up of nine members, including six designated by Berry and three by Glatfelter. The chairman will be designated by Glatfelter and all directors will be named later.
The announcement is the culmination of a comprehensive review of strategic alternatives to determine the value-maximizing path forward for Berry shareholders, Berry CEO Kevin Kwilinski said in a statement.
“We believe these two businesses, in combination, can drive significant value for shareholders with complementary portfolios, positioning each for greater success,” he said.
Following completion of the transaction, Berry will become a pure-play provider of packaging solutions, which management believes will deliver more predictable earnings growth for shareholders.
Thomas Fahnemann, Glatfelter’s president and CEO, said the uniting of the organizations creates a premier nonwovens supplier and a global leader in specialty materials.
“Our combined company is scaled to accelerate innovation and leverage our intellectual property over a large worldwide commercial platform and is well positioned to deliver substantial shareholder value,” he said.
The deal is expected to enhance earnings power with cost synergies of at least $50 million by year three.