Packaging Corporation of America (PKG - Analyst Report) recently entered into a definitive agreement to acquire Columbus Container, Inc., an independent corrugated products producer, for $100 million. The deal is likely to be closed by fourth quarter of 2016.
Per the deal, Packaging Corporation will acquire a full-line corrugated products business located in Columbus, IN along with five warehousing facilities and other connected units located in Indiana and Illinois. The acquisition is expected to increase containerboard production by over 30,000 tons. The transaction is expected to be immediately accretive to earnings.
On Aug 29, Packaging Corporation completed the acquisition of TimBar Corporation for $386 million, in cash. The transaction was funded through a five-year term loan facility. This acquisition is expected to increase containerboard integration by over 200,000 tons or 6% from its then current level of 87%. The transaction also allowed further optimization and enhancement of its mill capacity and was likely to be accretive with immediate effect.
The company’s corrugated product manufacturing plants produce a wide variety of packaging products, including conventional shipping containers used to protect and transport manufactured goods, multi-colored boxes, and displays with strong visual appeal that aid merchandise the packaged product across retail locations. In addition, Packaging Corporation is a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. The diverse product portfolio mitigates operating risks associated with any downturn in a particular product category and ensures a steady revenue stream.
Headquartered in Lake Forest, IL, Packaging Corporation operates eight mills and 93 manufacturing plants that manufacture several corrugated packaging products, including conventional shipping containers used to protect goods. The company is the fourth-largest containerboard and corrugated products producer in the U.S. Its product portfolio includes a diverse range of corrugated items such as shipping containers, point-of-sale graphics packaging, point-of-purchase displays and other specialized packaging. An enormous scale of production and an extended product portfolio offer a competitive advantage to the company to fulfill the varied demands of its diversified clientele.
Packaging Corporation carries a Zacks Rank #2 (Buy). Some other favorably ranked stocks include Raven Industries Inc. (RAVN - Analyst Report) , Sumitomo Corporation (SSUMY - Snapshot Report) and Leucadia National Corporation (LUK - Snapshot Report) , each carrying the same Zacks Rank as Packaging Corporation. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Raven has a long-term earnings growth expectation of 10% and is currently trading at a forward P/E of 44.9x. Its share price has increased by approximately 41.6% year to date.
Leucadia National has a long-term earnings growth expectation of 18% and is currently trading at a forward P/E of 97.6x. Its share price has increased by approximately 10.8% year to date.
Sumitomo has a long-term earnings growth expectation of 5% and is currently trading at a forward P/E of 11.8x. Its share price has increased by approximately 13.2% year to date.
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