LAKE FOREST, Ill.--(BUSINESS WIRE)--Aug. 21, 2017--
Packaging Corporation of America (NYSE: PKG) today announced that it has
entered into a definitive agreement to acquire substantially all of the
assets of Sacramento Container Corporation, and 100% of the membership
interests of Northern Sheets, LLC and Central California Sheets, LLC in
a cash-free, debt-free transaction for a cash purchase price of $265
million. The Company has also announced that it will discontinue
production of uncoated freesheet (UFS) and coated one-side (C1S) grades
at its Wallula, Washington mill in the second quarter of 2018 to begin
the conversion of its 200,000 ton-per-year No. 3 paper machine to a
400,000 ton-per-year high-performance 100% virgin kraft linerboard
machine.
The acquisition transaction is structured as a purchase of assets
resulting in a full step-up of the assets to fair market value. Under
the terms of the agreement, PCA will acquire full-line corrugated
products and sheet feeder operations in McClellan, California and
Kingsburg, California.
The value of the expected synergies, the tax benefit of the step-up of
assets and the operations’ EBITDA result in a purchase price multiple of
approximately five times EBITDA. The acquisition will be accretive to
earnings immediately.
PCA Executive Vice President Tom Hassfurther said, “The acquisition of
these well-capitalized facilities will further enhance our operations
both geographically and strategically. Also, the customer-focused
employees and strong management teams of Sacramento Container, Northern
Sheets and Central California Sheets will be an excellent fit with PCA’s
culture. This group has built a successful business based on providing
outstanding quality and service to a wide array of customers located in
the northern and central regions of California.”
Closing is subject to certain customary conditions and regulatory
approval and is expected early in the fourth quarter of 2017. The
company plans to finance the transaction with available cash on hand.
The conversion of the No. 3 paper machine at the Wallula Mill is planned
for the second quarter of 2018 with an initial production rate of
approximately 60 percent of capacity. Ultimately, production will
increase to 1,150 tons per day once a new headbox, forming section, and
shoe press are added in the fourth quarter of 2018. The capital cost of
the conversion is expected to be approximately $150 million.
Discontinuing paper operations at the Wallula Mill will result in
pre-tax cash severance and other shutdown charges of approximately $20 -
25 million and approximately $45 - 55 million of pre-tax noncash asset
impairment and accelerated depreciation charges. Charges of $25 - $35
million are expected to be recorded in the third quarter of 2017. The
Mill’s No. 2 paper machine will continue to produce 150,000
tons-per-year of semi-chemical medium.
PCA Chairman and CEO Mark Kowlzan said, “Our strategy is to improve the
overall profitability of the paper business for PCA by focusing our
people and investments on increasing our competitiveness and ensuring a
sustainable future in the office and printing & converting markets with
our mills in International Falls, MN and Jackson, AL. In addition, at
our current containerboard integration rate of 95%, the low-cost
conversion of the No. 3 paper machine at our Wallula Mill provides us
with much needed linerboard capacity, allows us to integrate over
200,000 tons of containerboard to our Sacramento Container acquisition,
and enables further optimization and enhancement of our current mill
capacity and box plant operations. The conversion will significantly
enhance the mill’s profitability and viability.”
Paul LeBlanc, Vice President – Paper, added, “We will work closely with
our customers to ensure a smooth transition as we wind down production
of the current grades we make on our No. 3 paper machine at Wallula.
Throughout this transition, all customers will continue to receive the
high quality products and service they are accustomed to.”
PCA is the fourth largest producer of containerboard and corrugated
packaging products and the third largest producer of uncoated freesheet
paper in the United States. PCA operates eight mills and 93 corrugated
products plants and related facilities.
Some of the statements in this press release are forward-looking
statements. Forward-looking statements include statements about expected
synergies or other benefits from the acquisition and mill conversion
activities, the expected costs of the mill conversion, the timing of
completion of the acquisition and mill conversion activities, our future
earnings and financial condition, our industry and our business
strategy. Statements that contain words such as “ will”, “should”,
“anticipate”, “believe”, “expect”, “intend”, “estimate”, “hope” or
similar expressions, are forward-looking statements. These
forward-looking statements are based on the current expectations of PCA.
Because forward-looking statements involve inherent risks and
uncertainties, the plans, actions and actual results of PCA could differ
materially. Among the factors that could cause plans, actions and
results to differ materially from PCA’s current expectations include the
following: the impact of general economic conditions; conditions in the
paper and packaging industries, including competition, product demand
and product pricing; fluctuations in costs; the possibility of unplanned
outages or interruptions at our principal facilities; and legislative or
regulatory requirements, particularly concerning environmental and tax
matters, as well as those identified under Item 1A. Risk Factors in
PCA’s Annual Report on Form 10-K for the year ended December 31, 2016
filed with the Securities and Exchange Commission and available at the
SEC’s website at “www.sec.gov”.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170821005649/en/
Source: Packaging Corporation of America
Barbara Sessions
Packaging Corporation of America
INVESTOR
RELATIONS: (877) 454-2509
PCA’s Website: www.packagingcorp.com