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Reynolds Group trumps Silgan as bid for Graham Packaging accepted

By Rory Harrington , 20-Jun-2011
Last updated on 23-Jun-2011 at 12:50 GMT

Reynolds Group trumps Silgan as bid for Graham Packaging accepted

Reynolds Group Holdings is to buy Graham Packaging for US$1.68bn after succeeding in outbidding original suitors Silgan Holdings.

The company, part of New Zealand billionaire Graeme Hart's Rank Group, was only revealed to have entered the bidding for the US-based rigid packaging firm last week.

The board of Graham Packaging decided the bid was too good to turn down and announced Friday that it had unanimously accepted Reynolds offer of US$25.50 per share.

The deal is expected to close in the second half of 2011 and will see Reynolds pay a total of US$4.5bn, which will include taking on Graham’s debt.

Graham Packaging confirmed that it would pay Silgan a US$39.5m termination fee under the terms of the agreement it had entered into with the company earlier this year.

Superior proposal

The original agreement struck between Graham and Silgan appeared under severe threat on 14 June when Reynolds’ superior bid was disclosed. Silgan noted that Graham would have to give it three days notice before formally terminating the deal.

It appears that notice had been served immediately as three days later on 17 June Graham Packaging declared it would be bought out by Reynolds, despite Silgan improving the terms of the original deal.

“Reynolds constitutes a superior proposal as compared to the transaction with Silgan even after taking into account certain adjustments to the terms thereof proposed by Silgan during the match-right period.” said Graham Packaging

In a separate statement, Reynolds said that no approval was needed from its shareholders for the deal – but it added the “transaction is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals”.

The company said it expected to fund the take over by taking on new debt “of up to $5bn and existing cash on hand”.

“The transaction is supported by fully committed financing”, as it confirmed the cash was already in place to complete the deal.

Strategic benefits

Reynolds Group said it expects strategic benefits and operational cost savings as a result of the acquisition.

“These synergies will be achieved primarily through reductions in administrative expenses, procurement savings and logistics efficiencies,” it said in a company statement.

Graham Packaging is a major supplier of rigid containers across the food and beverage industry – including hot-fill juices, yoghurts, condiments, dressings and beers.

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