Packaging Corp. to Buy Boise for $1.27 Billion
Packaging Corp. of America, the fourth-largest U.S. producer of corrugated shipping boxes, agreed to buy Boise (BZ) Inc. for about $1.27 billion in cash to add capacity in the Pacific Northwest and Europe.
Packaging Corp. will pay $12.55 a share, the companies said today in a statement, 26 percent more than Boise’s Sept. 13 closing price. The deal also includes $714 million of Boise’s debt and will close in the fourth quarter, they said.
“This acquisition is an excellent fit both operationally and strategically, with unique and substantial synergies,” Packaging Corp. Chairman Paul Stecko said today on a conference call. “It also provides the container board that PCA needs to support our long-term corrugated products growth.”
The takeover will increase Lake Forest, Illinois-based Packaging Corp.’s container board production capacity 42 percent to 3.7 million tons a year, the companies said. Packaging Corp. forecast pretax savings of $105 million within three years of the deal’s completion from cutting transportation costs and other efficiencies.
“It solves Packaging Corp.’s need for more container board capacity in a cost-effective manner,” Joshua Zaret, a New York-based analyst at Longbow Research LLC, said today by telephone.
Boise, based in the eponymous Idaho city, also makes newsprint and office paper and owns mills, production facilities and distribution centers in North America and Europe. The shares surged 26 percent to a record $12.56 in New York. Packaging Corp. advanced 11 percent to $60.43, the highest since the shares were first sold in January 2000.
The combined companies generated $5.5 billion in sales and $879 million in earnings before interest, taxes, depreciation and amortization last year, according to the statement.
The deal values Boise at 7.5 times trailing 12-month Ebitda, according to data compiled by Bloomberg. That compares with a median Ebitda multiple of 8.7 in four comparable takeovers valued at $500 million or more that were announced in the past five years, the data show.
Packaging Corp. said in a presentation posted on its website that it will refinance Boise’s debt with a $2 billion debt offering, raising the combined company’s total borrowings to $2.5 billion. Packaging Corp. will cut its debt by $1 billion in the next three to four years, according to the presentation.
Packaging Corp.’s financial adviser on the takeover is Bank of America Corp., which is also providing bridge financing for the deal, and Mayer Brown LLP is legal counsel. Boise’s financial adviser is JPMorgan Chase & Co. and its legal adviser is Skadden Arps, Slate, Meagher & Flom LLP.
The value of the deal was calculated based on the 100.9 million shares of Boise that were outstanding as of July 24, according to data compiled by Bloomberg.
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