CD&R packaging company plans $3bn merger

Clayton Dubilier & Rice portfolio company Riverwood Holding has agreed a merger with Graphic Packaging in a deal that values the combined company at around $3bn.

( Riverwood Holding, a portfolio company of New York-based private equity firm Clayton, Dubilier & Rice, yesterday has abandoned an initial public offering in favour of a merger with Graphic Packaging International.


Riverwood Holding filed papers for an initial public offering of stock last May, but the company was unable to attract investor interest.


“This is an alternative [to an initial public offering], but a much more attractive alternative,” said Stephen Humphrey, chief executive officer and president of Riverwood. “It accomplishes a similar end.”


Under the terms of the transaction, Graphic Packaging, a specialist in folding carton consumer products packaging, and Riverwood, which focuses on multi-pack beverage packaging, will merge in a stock transaction with an enterprise value of approximately $3bn.


The combined company will have 2002 pro forma revenues of approximately $2.3bn and EBITDA in excess of $400m.


An investment group led by Clayton, Dubilier & Rice acquired Riverwood International in March 1996 from Manville for approximately $2.7bn, including the assumption of approximately $1.1bn of debt. Clayton, Dubilier & Rice Fund V’s investment of $225m gave it a 29.8 per cent ownership stake.  Upon completion of the transaction with Graphic Packaging, Fund V will own 17.25 per cent of the new company.


Graphic Packaging International, which was spun off from Adolph Coors beer company in 1992, is Riverwood's fifth-largest customer for paperboard.


Several Coors family trusts, which own approximately 75 per cent of the outstanding common shares of Graphic Packaging as converted, will own approximately 30 per cent of the combined company.


Headquartered in Atlanta, Riverwood has annual sales of over $1.2bn and approximately 4,100 employees at its operations in six countries. Riverwood has approximately $900m in public debt outstanding. Graphic Packaging International, with 2002 revenues of approximately $1.1bn, provides folding carton packaging supplier to the food, beverage and other consumable products markets across North America.


Graphic Packaging chairman and chief executive officer, Jeffrey Coors, will serve as executive chairman of the combined company. Steve Humphrey will serve as president and chief executive officer. The board of directors will consist of nine members: Coors, Humphrey, five independent directors and two directors nominated by Riverwood’s investors, which include Clayton Dubilier, Exor, Brown Brothers and other institutional investors. The combined company will employ more than 8,000 people on four continents and will be headquartered in Atlanta.


The transaction is expected to be completed in the third quarter of 2003, subject to customary shareholder and regulatory approvals.