Acquisition further broadens closure franchise into the highly engineered dispensing systems market
<org value="NASDAQ-NMS:SLGN" idsrc="xmltag.org">Silgan Holdings Inc.</org> (NASDAQ:SLGN), a leading supplier of rigid packaging for consumer goods products, announced today that it has entered into a definitive agreement with <org value="NYSE:WRK" idsrc="xmltag.org">WestRock Company</org> (NYSE:WRK) to acquire its specialty closures and dispensing systems business. This business is a leading global supplier of highly engineered triggers, pumps, sprayers and dispensing closure solutions to major branded consumer goods product companies in the Home, Health and Beauty markets. It operates a global network of 13 plants across <location value="LB/nam" idsrc="xmltag.org">North America</location>, <location value="LR/eur" idsrc="xmltag.org">Europe</location>, <location value="LB/sam" idsrc="xmltag.org">South America</location> and <location value="LR/asp" idsrc="xmltag.org">Asia</location>. For the fiscal year-ended <chron>September 30, 2016</chron>, this business generated sales of approximately <money>$566 million</money>.
“This acquisition significantly enhances the scope and breadth of our market leading closure franchise by bringing new capabilities in the highly engineered dispensing systems category,” said <person>Tony Allott</person>, <org value="NASDAQ-NMS:SLGN" idsrc="xmltag.org">Silgan's</org>President and Chief Executive Officer. “This business has a long history as a differentiated packaging franchise with deep customer relationships, a clear focus on the needs of its customers and markets and a strong track record for product innovation to meet these needs. This acquisition allows us to further build relationships with common global customers, provides significant opportunities for cost synergies, creates an incremental platform for growth and strongly enhances our free cash flow,” continued Mr. Allott. “We believe this business, like <org value="NASDAQ-NMS:SLGN" idsrc="xmltag.org">Silgan</org>, holds similar passions for excellence in customer support, quality, safety and competitive franchise positions, while maintaining a strong focus on returns and free cash flow,” concluded Mr. Allott.
The purchase price for this acquisition is <money>$1.025 billion</money>, subject to adjustments outlined in the purchase agreement for this acquisition. The transaction is subject to the satisfaction of certain customary conditions and receipt of applicable regulatory approvals and is expected to close late in the first quarter of 2017. <org value="NASDAQ-NMS:SLGN" idsrc="xmltag.org">Silgan</org>expects to initially fund the purchase price for this acquisition from a combination of cash on hand and borrowings under the Company’s senior secured credit facility, including a committed incremental term loan.
This acquisition is expected to be accretive to earnings, excluding the impact of the required purchase accounting adjustments. The transaction will become more accretive as synergies are phased in over the next 24 months following the closing.
Highlights of the transaction:
- Market Focus: Following the acquisition, <org value="NASDAQ-NMS:SLGN" idsrc="xmltag.org">Silgan</org> will expand its leadership position in the global closure market to include highly engineered dispensing systems for food, beverage, health care, garden, home and beauty products, in addition to Silgan’s current offerings in hotfill vacuum closures and coldfill closures.
- Synergies: <org value="NASDAQ-NMS:SLGN" idsrc="xmltag.org">Silgan</org> expects to realize operational cost synergies of <money>$15 million</money> within 24 months following the acquisition. These synergies will be achieved primarily through reductions in general and administrative expenses, procurement savings and manufacturing efficiencies.
- Financial Impact: <org value="NASDAQ-NMS:SLGN" idsrc="xmltag.org">Silgan</org> expects the transaction to be accretive to earnings, excluding the impact of purchase accounting adjustments, and significantly accretive to free cash flow per share in 2017.
- Financing: Pro forma for the transaction, Silgan’s net leverage ratio under its credit facility will be approximately 4.3 times, which is consistent with past levels following acquisitions. <org value="NASDAQ-NMS:SLGN" idsrc="xmltag.org">Silgan</org> expects to finance this transaction with debt at an attractive cost. Given its pro forma free cash flow profile, <org value="NASDAQ-NMS:SLGN" idsrc="xmltag.org">Silgan</org>expects its net leverage ratio to return to its target range in the next 24 months.
