Graham Packaging targets domestic food with Liquid takeover

By Guy Montague-Jones

- Last updated on GMT

Related tags Free cash flow

Graham Packaging has agreed to acquire Liquid Container for $568m in an effort to build its core food and beverage business in North America.

In a conference call, Mark Burgess, CEO of Graham, said that rather than go for potentially higher growth in international markets, the company had decided to focus on the domestic food and drink business. This he said is the “real heart and soul”​ of the company.

Graham courted Liquid Container because of its complementary but distinct operations. Liquid operates 14 blow molded plastic container plants in the US and is expected to achieve sales of almost $400m and an EBITDA of $72m in 2010.

Acquisition rationale

Around 80 per cent of its sales are to customers in the food category, and these tend to be mid-sized companies. Burgess said the customer base is complementary to that of Graham because there is very little overlap – Graham has tended to focus on large, international firms.

In addition, Burgess said the geographical strength of Liquid Container in the south and west of the US is complementary to its own operational footprint.

As for technology, the CEO said Liquid Container brings new expertise in both hot and cold fill. In particular, the company is currently testing out a hot fill PET technology, which he said is “showing real promise”.

In summary, Burgess said: “Liquid Container takes our technology capability, customer base, and domestic footprint to the next level.

“This is one of the few scale businesses that meet our acquisition criteria and we are excited about the new growth opportunities that Liquid Container offers Graham.”

Financial aspects

Graham believes the transaction will be accretive on an EBITDA, EPS, and free cash flow basis in its first full year of operation. Integration is expected to be completed in the first half of 2011.

Graham expects funding with 100 per cent debt and has arranged committed financing. The transaction is expected to close in 2010, subject to normal regulatory approvals and customary closing conditions.

Related topics Processing & packaging

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