Graphic Packaging has agreed to acquire the European Food Carton Business of Contego for £71m to expand into new end markets.
The company said the deal would create a “leading position in the European food and consumer products folding carton market”.
The acquisition enhances Graphic Packaging's position in Europe by growing its operating footprint, expanding into new markets and providing new opportunities for growth, they added.
The all-cash deal funded using existing liquidity also involves £10m in other net liabilities and is expected to close in December subject to standard closing requirements.
Contego Cartons operates three folding carton facilities that convert 150,000 tons of paperboard annually into folding cartons.
Two of the facilities are located in the UK while the third facility is in the Netherlands.
Contego Cartons had trailing twelve month sales of $260m and EBITDA of nearly $19m and is owned by Platinum Equity.
The firm manufactures speciality cartons, sandwich packs and standard folding cartons for markets including bakery, confectionery and beverage.
Graphic Packaging said they expect to generate $8-$10m of synergies over next two years and be accretive to earnings in first full year after integration.
New diversified platform
David Scheible, Graphic Packaging's president and chief executive officer, said the combination of the businesses creates a new diversified platform.
"Contego operates throughout Western Europe with state of the art facilities in the UK and the Netherlands.
“Combining Graphic's current European business focused in the beverage markets with Contego's strong market share position in the European food and consumer products markets will allow us to broaden our customer base and enhance our competitive positioning.
“Similar to our strategy in the US, we are committed to growing our European business around food and beverage markets and optimizing our supply chain footprint around our customers' needs,” he said.
“There are solid synergies in this combination and we believe the Contego Cartons acquisition is an important step in strengthening our competitive positioning in Europe."
The Contego Healthcare business, a packaging supplier to the pharmaceutical and healthcare industries, is not affected.