US-based Graphic Packaging has combined its multiwall bag and speciality plastics packaging business with the kraft paper and multiwall bag units of Delta Natural Kraft and Mid-America Packaging, both wholly owned subsidiaries of Capital Five Investments.
Graphic said the merger will not impact its net leverage ratio. The company will own 87% of the new entity while the remainder will be owned by Capital Five Investments.
The company claims that the new firm will be North America's only vertically integrated multiwall bag business.
The move is expected to yield $20-25m in synergy opportunities, which may contribute to Graphic's earnings by 2013.
Neither party received cash consideration as part of the transaction, although a debt of $25m held by Delta Natural Kraft and Mid-America Packaging was settled using funds from Graphic Packaging.
The transaction was structured as a tax-free combination and will allow for tax efficient distribution of profits to the owners of the newly created entity.
Graphic Packaging posted sales of approximately $3.2bn in the first nine months of 2011, up 2% compared to the corresponding period in 2010.
During the period it posted profits of about $11m after losing almost $9m in the year-ago period.
Delta Natural Kraft and Mid-America Packaging have annual revenues of approximately $150m.