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Investing.com -- Packaging Corporation of America (NYSE:PKG) stock surged 6.9% after the company announced it will acquire Greif Inc.’s (NYSE:GEF) containerboard business for $1.8 billion in cash. Greif shares also jumped 4.4% following the news.
The acquisition includes two containerboard mills with approximately 800,000 tons of production capacity and eight sheet feeder and corrugated plants across the United States. The Greif containerboard business generated approximately $1.2 billion in sales and $212 million in EBITDA for the 12 months ended April 30, 2025.
PCA expects to realize pre-tax synergies of approximately $60 million within two years after closing, primarily through improved operational efficiencies, increased integration, mill grade optimization, and lower transportation costs. The company anticipates achieving about half of these benefits by the end of the first year.
The $1.8 billion purchase price represents a multiple of 8.5 times LTM EBITDA, or 6.6 times when including expected synergies. PCA plans to finance the transaction with $1.5 billion in new debt and cash on hand, resulting in a pro forma leverage ratio of approximately 1.7 times after completion.
"This acquisition furthers PCA’s profitable growth strategy. The mills nicely complement PCA’s system and will provide containerboard to support PCA’s continued corrugated products growth," said PCA CEO Mark Kowlzan.
The transaction is expected to close by the end of PCA’s third quarter, subject to regulatory approvals and customary closing conditions. According to PCA, the acquisition will be immediately accretive to earnings.
For Greif, the divestiture aligns with its "Build to Last" strategy, with CEO Ole Rosgaard noting the sale "unlocks immediate value for our shareholders" and represents "a pivotal step in our work to sharpen our portfolio."
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