Credit: Shutterstock photoLeading packaging products manufacturer Packaging Corporation of AmericaPKG recently completed the acquisition of TimBar Corporation, a large independent corrugated products producer, for $386 million in cash. The transaction was funded through a five-year term loan facility of the company.
The portfolio of acquired assets includes five corrugated products plants, two fulfillment centers and four design centers located primarily in the eastern and southeastern U.S. TimBar reported $324 million worth of sales in 2015. The company offers packaging solutions to customers in the higher margin retail, industrial operations and display and fulfillment markets with a focus on multi-color graphics and technical innovation.
Packaging Corporation expects this acquisition to increase its containerboard integration by over 200,000 tons or 6% from its current level of 87%. The transaction will also allow for further optimization and enhancement of its mill capacity. The acquisition is likely to be accretive with immediate effect.
PACKAGING CORP Price
PACKAGING CORP Price | PACKAGING CORP Quote
Packaging Corporation is the fourth largest containerboard and corrugated products producer in the U.S. Its products include a diversified range of corrugated products such as shipping containers, point-of-sale graphics packaging, point-of-purchase displays and other specialized packaging. An enormous scale of production and an extended product portfolio offer a competitive advantage to the company to fulfill the demands of its diverse clientele.
The company's corrugated product manufacturing plants produce a wide variety of packaging products, including conventional shipping containers used to protect and transport manufactured goods, multi-colored boxes, and displays with strong visual appeal that aid merchandise the packaged product across retail locations. In addition, Packaging Corporation is a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. The diverse product portfolio mitigates operating risks associated with any downturn in a particular product category and ensures a steady revenue stream.
Despite stiff competition from other alternative product categories, industry-wide corrugated product shipments increased 2.2% year over year during the second quarter of 2016. The company expects seasonally higher volumes for containerboard and corrugated products and lower energy costs in the third quarter of 2016. Being one of the leading producers of containerboard and corrugated products in the country, Packaging Corporation is likely to benefit from the modest growth dynamics of the industry. Paper prices are expected to move higher reflecting continued realization of the announced price increases, while annual outage costs are expected to be lower.
Packaging Corporation currently carries a Zacks Rank #2 (Buy). Some other favorably ranked stocks in the industry include Fibria Celulose S.A. FBR , Neenah Paper, Inc. NP and Sappi Limited SPPJY , each carrying the same Zacks Rank as Packaging Corporation.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
