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Packaging Corporation of America Closes Sacramento Buyout

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Packaging Corporation of America (PKG - Free Report) has concluded the previously announced acquisition of all assets of Sacramento Container Corporation, and 100% membership of Northern Sheets, LLC and Central California Sheets, LLC for $265 million in cash.

The purchase price multiple of approximately five times EBITDA is based on  the value of the expected synergies post buyout, the tax benefit of the step-up of assets and the operations’ EBITDA. The acquisition is likely to be accretive to earnings immediately.

Per the deal, Packaging Corporation of America has bought full-line corrugated products and sheet feeder operations in McClellan and Kingsburg, CA. The buyout is likely to boost the company’s operations both geographically and strategically. Further, the customer-focused employees and strong management teams of Sacramento Container, Northern Sheets and Central California Sheets are perfectly in sync with Packaging Corporation of America.

The company will gain from focus on its acquisition strategy. Further, it will benefit from diverse product portfolio and progress in DeRidder mill. Increase in capital spending will also drive growth.

In a year, Packaging Corporation has outperformed its industry with respect to price performance. The stock gained 44.1%, while the industry rose 11.8%.

Packaging Corporation currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the same sector are AGCO Corporation (AGCO - Free Report) , Berry Global Group, Inc. (BERY - Free Report) and UFP Technologies, Inc. (UFPT - Free Report) .  All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AGCO Corporation’s estimate for fiscal 2017 has moved up 1% in the past 60 days.

The Zacks Consensus Estimate for fiscal 2017 for Berry Global Group has gone up 3% in the past 60 days.

The Zacks Consensus Estimate for fiscal 2017 for UFP Technologies has gone up 1% in the past 60 days.

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