Blackstone, Hicks agree to deal termination provision

A recent amendment finalised between The Blackstone Group and special purpose acquisitions company Hicks Acquisition makes it easier for either party to back out of an agreement to take Graham Packaging public in a $3.2bn IPO.

The Blackstone Group and Dallas-based special purpose acquisitions company (SPAC) Hicks Acquisition amended an agreement to take Graham Packaging Holdings public that makes it easier for either side to terminate the deal.

Hicks agreed to purchase Graham in partnership with Blackstone and the Graham Group, the Graham family’s private equity firm, for $3.2 billion in July 2008.

The deal is believed to be the largest ever such agreement between a SPAC and an industrial company, with the combined enterprise to be renamed Graham Packaging Company and floated on the New York Stock Exchange. A SPAC uses money raised in an IPO to buy another business, which then becomes publicly traded through the SPAC once shareholders approve the deal.

Under the terms of the deal, Hicks will take a 66 percent stake in Graham, with Blackstone retaining the largest ownership stake for at least two years. Graham’s current stockholders will receive $350 million in cash held in a trust, 35 million common shares and 2.8 million warrants.

However, the amended agreement between Hicks and Blackstone reduces the assurances that the deal will go through. Both firms now have the right to terminate the deal by giving written notice to the other side, and each party will be released from the agreement’s exclusivity provisions and be permitted to consider other possible transactions.

Graham Packaging had $2.5 billion in sales in 2007 and operates 83 manufacturing plants in North America, Europe and South America, while it recently promoted Mark Burgess from chief financial officer to chairman. Hicks was launched in a record $552 million IPO in the fall of 2007.