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Graphic Packaging (GPK) to Acquire AR Packaging for $1.45B

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Graphic Packaging Holding Company (GPK - Free Report) announced that it will acquire Lund, Sweden-based AR Packaging Group AB from CVC Capital Partners Fund VI. The transaction has been valued at $1.45 billion in cash.

It is worth mentioning here that CVC Capital Partners is a renowned investment advisory and private equity firm. It has operations in the United States, Europe and Asia. Its assets under management are $118 billion.

Then again, AR Packaging specializes in manufacturing fiber-based packaging products. It has operations in 13 countries and employs 5,000 people. Notably, the firm is the second-largest producer of consumer packaging products (fiber-based) in Europe.

Inside the Headlines

As noted, the transaction is expected to strengthen Graphic Packaging’s market position through solid product offerings, improved scale and innovative capabilities in Europe and bordering areas. AR Packaging’s skilled employees and 13 factories will be part of Graphic Packaging, upon the buyout completion.

Graphic Packaging anticipates the buyout to boost its annual sale base by $1.1 billion and adjusted earnings before interest, tax, depreciation and amortization by $160 million. Also, earnings and cash flow accretion from the deal are expected immediately.

The company anticipates the closing of the transaction to be subject to the satisfaction of customary closing conditions and the receipt of regulatory approvals. It expects the deal to be completed in the coming 4-6 months. In the three years following the closing of the deal, Graphic Packaging expects synergies of $40 million.

Graphic Packaging’s Inorganic Initiatives

The company believes in acquiring businesses to improve its product lines and market exposure.

In April 2021, Graphic Packaging signed an agreement to purchase Americraft Carton, Inc. for $280 million and $8 million of other consideration. Notably, Americraft specializes in making paperboard folding cartons. The buyout, expected to be completed in second- or third-quarter 2021, is predicted to boost Graphic Packaging’s sales by $200 million.

Zacks Rank, Price Performance and Estimate Trend

With a market capitalization of $5.4 billion, Graphic Packaging currently carries a Zacks Rank #2 (Buy).

In the past three months, the company’s shares have gained 18.8% compared with the industry’s growth of 14.6%.




 

Meanwhile, the Zacks Consensus Estimate for its earnings has been raised by 4% to $1.31 for 2021 and 8.8% to $1.61 for 2022 in the past 30 days. Further, the estimate for the second quarter has been unchanged at 28 cents during the same period and that for the third quarter has been increased by 15.2% to 38 cents.

Graphic Packaging Holding Company Price and Consensus

 

Graphic Packaging Holding Company Price and Consensus

Graphic Packaging Holding Company price-consensus-chart | Graphic Packaging Holding Company Quote

Other Stocks to Consider

Three other top-ranked stocks in the Zacks Industrial Products sector are Berry Global Group, Inc. (BERY - Free Report) , Illinois Tool Works Inc. (ITW - Free Report) and Applied Industrial Technologies, Inc. (AIT - Free Report) . All these companies presently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 30 days, earnings estimates for the companies have improved for the current year. Further, earnings surprise for the last reported quarter was 21.37% for Berry Global, 11.05% for Illinois Tool and 35.64% for Applied Industrial.

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