Smurfit Kappa in $157m deal for US company
Manufacturing group will acquire Bates Container as part of drive into the US
Gary McGann, chief executive officer of Smurfit Kappa Group, says that the acquisitoin of Bates Container will increase the group’s market presence in the US and provide it with higher quality earnings in this region. Photograph: Alan Betson / THE IRISH TIMES
Paper and packaging manufacturing group Smurfit Kappa Group is to acquire Bates Container, a non-integrated corrugated packaging manufacturer in the south west of the United States, in a deal valued at up to $157 million (€m).
Gary McGann, Smurfit Kappa Group CEO, said that the transaction reflects the group’s “continued focus on the accretive growth of our operations in the Americas and the combination of SKOC and Bates will increase our market presence and provide us with higher quality earnings in this region”.
Bates is a long-established highly regarded private corrugated manufacturer strategically positioned to serve and grow its customer base in the wider Texas region by delivering high quality differentiated packaging solutions. Bates employs 320 people and a substantial element of its approximately 135,000 tonnes of containerboard requirement will be supplied by Smurfit Kappa Orange County’s containerboard mill in Dallas.
Smurfit will pay $150 million upfront for the company, with a further estimated deferred payment of $7.5 million.
The acquisition is expected to complete in the fourth quarter of 2014 subject to customary regulatory approval, with funding from existing cash reserves. The pro forma 2014 EBITDA for Bates is expected to be $18.5 million and the Group has identified synergies of $11.5 million which it expects to deliver within 24 months of completion. Inclusive of synergies, the transaction will carry a pro-forma multiple of 5.25 times EBITDA.
Tony Smurfit, Smurfit Kappa Group COO said that the acquisition “fits perfectly with our integrated model, complementing in a significant way the successful integration of SKOC which was acquired in December 2012 and providing us with substantial scope for further synergies in both businesses”.
“These synergies will be primarily delivered through additional integration of the containerboard needs of Bates into SKOC’s 350,000 tonnes recycled containerboard mill, with additional savings expected through a range of operational efficiency measures. Importantly, the Group’s enlarged packaging footprint in the US will further enhance SKG’s capacity to provide innovative, insight-led and value enhancing packaging solutions to both current and prospective customers”.