* Graham shareholders receive $4. 75/shr and 0.
Silgan shares * 402 SHRS, including debt, traded for $4.
1 bln * offers a 17 pct premium deal to Graham shareholders * Blackstone owns Graham\'s 61 pct;
Agreed to sell * Silgan shares up 16 pct and Graham up 29 pct (
Add analyst reviews for industry consolidation, update stock)
Meha Mandavia and Divia Sharma, Bangalore, April 13 (Reuters)-
Silgen Holding, which produces cans for Campbell Soup, will buy rival Graham Packaging for $1.
3 billion cash and inventory to support its plastic packaging business.
The deal is worth $4.
The 1 billion, including debt, came when metal prices rose to make plastic the preferred packaging material, quickly replacing tin and aluminum.
Analysts expect packaging companies with strong balance sheets and good cash flow to further merge, and the transition from metal to plastic is expected to further drive mergers and acquisitions.
Silgan competes with larger competitors such as Ball Corp and Crown Holdings Inc. , which mainly produce metal packaging products, as well as Sonoco and Bemis, which have large plastic packaging businesses.
Albert Kabili, Macquarie Research analyst, said: \"The plastic packaging space is not very consolidated, so there is more room for mergers and acquisitions . \" Note that Sonoco may add some niche plastic packaging to complement its consumer packaging business.
A few days before Silgan\'s acquisition, Blackstone, a private equity firm with a 61% stake in Graham, received EU approval to buy Mivisa, a Spanish canned food manufacturer, from CVC. [ID:nBRQ010112]
\"Silgan\'s plastic business is about one
It\'s Graham\'s fifth. . .
The hard plastic industry needs more integration;
So Silgan either has to sell or get bigger, \"says Robert W.
Ghansham Panjabi, Baird analyst.
Shares of the two companies hit a record high in Wednesday\'s trading.
On Nasdaq, Silgan shares rose 16%, while Graham rose 29% to $21.
On the New York Stock Exchange.
Graham\'s sales were $2010.
5 billion, custom strike
Consumer goods manufacturers such as rigid plastic container
s molded by H. J.
Heinz, Kraft, Unilever and Coca-Cola.
The deal will increase manufacturing facilities in the Americas, Europe and Asia and create a company with annual sales of more than $6. 2 billion.
Sylgan with a long historyterm debt-to-
The equity ratio is 1.
The deal will bear huge debts on the 61 th, but analysts have played down any concerns.
\"Silgan has always had a lot of debt on its balance sheet.
\"They are very comfortable to run with a lot of leverage, so I don\'t think that\'s something to worry about over-doing,\" Panjabi said . \".
Graham shareholders will receive $4.
Cash per share 75, 0.
402 shares of Silgan common stock.
The offer is $19.
$56 per share, a 17% premium from Graham\'s closing on Tuesday.
As of Tuesday\'s close, Graham\'s stock traded at nine times its forward earnings.
65 times, and Silgan\'s offer is more than 11 times the forecast revenue.
The company, based in Silgan, said the deal would generate free cash flow of about $0. 5 billion, or $5 per share, and would increase revenue in the first year after the transaction was completed, it is expected in the third quarter.
Silgan expects to cut operating costs by $50 million in the third year after the deal.
Since 1987, Silgan has acquired 25 companies, contributing to the development of its US business. S.
The market share of metal food container
s reached about 50%.
Bank of America Merrill Lynch is a financial adviser to Silgan.
JPMorgan Securities advises Graham. (
In the Megha Mandavia and Malaya Sharma described in this report.
Edit Saumyadeb Chakrabarty and Ian Geoghegan)(megha.
Mandavia @ Thomson Reuters. com; within U. S.
646 223 8780; outside U. S.
Reuters News; megha. mandavia. reuters. com@reuters. net))
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