Packaging Corporation completes $386 million acquisition of Timbar Corporation

SEATTLE (Scrap Monster): Packaging products manufacturer Packaging Corporation of America (PCA) has announced that it has completed acquisition of assets of Timbar Corporation in an all-cash deal of $386 million. The company had entered into a definitive agreement in July this year to acquire the assets of privately-held corrugated producer Timbar Corporation. The acquisition was funded by a new $385 million five-year term loan facility.

PCA Chairman and CEO Mark Kowlzan noted that the company is very pleased to complete the acquisition. He welcomed all Timbar employees to PCA. He further stated that integration of Timabr facilities will enhance the company’s financial performance, while maintaining a strong balance sheet. The acquisition is a geographic and strategic fit for the company and that it will bring in substantial benefits and synergies, added Kowlzan.

The transaction is expected to result in further optimization and enhancement of its mill capacity. Also, the containerboard integration is expected to witness an increase of 6% from its current level of 87%. The acquired assets include Timbar’s five corrugated products plants, two fulfillment centers and four design centers located in the eastern and southeastern US.

The acquisition deal was widely welcomed by the analyst community. Citi termed the deal as positive as the jump in integration rate from 87% to 93% will result in higher operating margins for the company. According to BMO, the deal is expected to add $0.42 per share to PCA’s EPS. Moody’s termed the deal as credit positive, stating that the addition of Timbar’s high-performance converting facilities will further boost PCA’s forward vertical integration levels.

The company had reported second quarter 2016 net income of $116 million, or $1.23 per share and $1.25 per share excluding special items. Second quarter net sales were $1.42 billion in 2016 and $1.45 billion in 2015. It reported 2.2% jump in corrugated products shipment when compared with second quarter of 2015, despite stiff completion from alternative product categories. Packaging sector mix and price declined over the year. The containerboard production totaled 926,000 tons during the quarter. Paper segment price and mix too were lower when compared with the same quarter a year before. White paper sales volume reported marginal increase, whereas pulp volumes declined when compared with second quarter of 2015.

Going forward, the company expects seasonally higher volumes for containerboard and corrugated products and lower energy costs in the third quarter of 2016. It expects big jump in containerboard, corrugated products and white paper shipment volumes during Q3 this year. Further, it expects paper prices to trend higher and annual outage costs to subside further.

About PCA

PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States and the third largest producer of uncoated freesheet paper in North America. PCA operates eight mills and 95 corrugated products plants and related facilities.

About Timbar

TimBar Packaging & Display has been a leading manufacturer of corrugated packaging for more than 55 years. The company was founded in 1955 as Oxford Container in New Oxford, Pennsylvania. Today, it offers a large array of products and services including corrugated sheets, shipping containers, retail packaging, point of purchase displays, protective foam and other specialty products. The company had reported annual sales of $324 million in 2015.