Packaging Corporation of America announces acquisition of assets of TimBar Corp.

SPOKANE (Scrap Monster):  Packaging Corporation of America (PCA) has announced that it has entered into a definitive agreement to acquire the assets of privately-held corrugated producer Timbar Corporation for $386 million in cash. The agreement covers acquisition of Timbar’s five corrugated products plants, two fulfillment centers and four design centers located in the eastern and southeastern US. The closing of the transaction is subject to certain customary conditions and regulatory approvals and is expected by third quarter this year.

The acquisition will help PCA to raise its containerboard integration level by nearly 6% from its current level of 87%. It will also lead to further optimization and capacity enhancements at these facilities. PCA Chairman and CEO Mark Kowlzan noted that the acquisition is a geographic and strategic fit for the company and that it will bring in substantial benefits and synergies. Timbar’s committed focus on continuous improvement, innovation and customer service will contribute to excellent operating margins, he said. Kowlzan further noted that the addition of Timbar assets will enhance the company’s strong balance sheet.

According to Tom Hassfurther, Executive Vice-President Corrugated Products, PCA, the highly skilled employees, culture and customer base of TimBar complements PCA. The acquisition provides opportunity to apply its operating and sales expertise across a larger system. It will help the company to become less reliant on export market. At the same time, Hassfurther promised that strategic relationship with all key export customers will be maintained as before.

Meantime, WallStreet has welcomed the acquisition deal. Citi analysts termed the deal as positive as the jump in integration rate from 87% to 93% will result in higher operating margins for the company. BMO noted that Timbar’s plants in the eastern US region carry a strong “value-added” element. The deal is expected to add $0.42 per share to EPS. Further, credits ratings agency 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.

On future M&A prospects, Citi noted that PCA’s acquisition rate is likely to decline in the near term despite its excellent track record of integrating acquired box plants. The recent acquisitions of converters could lead to increased price competition at the box plant level. The company is likely to revisit mill-side acquisitions or potential conversions of its existing mill footprint, Citi added.

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 90 corrugated products plants and related facilities.

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.