Today, Graham said it has received an “unsolicited proposal” from a private company for $25 a share cash, or $1.64 billion, and while the company isn’t naming names one source is pointing a finger at either Sonoco or Amcor as the likely bidder. Graham in April agreed to sell itself to Silgan Holdings for about $1.3 billion (not including debt). The deal had been expected to close in the second half of this year.
The new offer is 13% higher than Silgan’s bid of about $22.10 a share, according to my coworkers at Thomson Reuters.
Graham’s board has concluded that the new offer could lead to a proposal that is superior to Silgan’s. The new bid is still subject to due diligence, among other things, and there is no assurance that the proposal will result in a deal. Graham’s board hasn’t changed its recommendation from the Silgan offer, the announcement said.
But if Graham’s board does switch its view, it must pay Silgan a $39.5 million breakup fee.
York, Pa.-based Graham makes plastic containers that are used for sports drinks, nutritional supplements and beer. The company had been up for sale for some time before Silgan came in with its offer. Graham reported roughly $8.1 million in profit for the quarter ended March 31 compared to $24.5 million in losses for the same time period in 2010. It had $2.79 billion in long-term debt as of March 31, according to regulatory filings dated March 31.
So who is this mystery bidder? I’m told that it’s likely a strategic. Possible candidates include Berry Plastics, Rexam, Sonoco and Amcor. Ardagh Group, of Ireland, was also interested in Graham Packaging. Private equity could be involved. UPDATE: The Rank Group is behind the $1.64 billion offer for Graham, Thomson Reuters is reporting.
Rexam is selling its closures business and Berry Plastics is believed to be the buyer, one banker says, making it less likely either of those two is the new bidder. It’s likely either Sonoco or Amcor, the source says.
Graham has been a very long hold for Blackstone, which acquired the company in 1998 in a $997 million deal (Blackstone reportedly invested $208.3 million equity). Typically PE firms own portfolio companies for 5 to 7 years.
Blackstone had tried several times to exit Graham by taking it public. In 2004, Graham planned to launch an IPO but pulled the deal after buying the blow-molded plastic container business of Owens Illinois. Four years later Graham tried again to go public when it agreed to a $3.2 billion sale to Hicks Acquisition Co., the blank check company from Thomas Hicks. The deal included a $350 million payout for company shareholders.
Hicks eventually called off the buy of Graham due to cash flow problems, according to press reports.
Last year, in February of 2010, Blackstone successfully took Graham public. The PE firm did not sell shares in the IPO and owned about 40.3 million shares or 64.4% in Graham by April 2010, according to regulatory filings.
Calls to Silgan and Graham were not returned.