Packaging Corp. of America (PKG) has agreed to buy packaging and
paper products company Boise Inc. (BZ) for about $1.28 billion, a
deal that expands Packaging Corp.'s containerboard business.
Boise holders will receive $12.55 a share in cash, a 26% premium
to Friday's close. Including Boise's outstanding debt of $714
million, the deal is valued at $1.995 billion. The acquisition,
which has been approved by both companies' boards, is expected to
close in the fourth quarter.
Boise shares soared 25% to $12.49 in premarket trading. Through
Friday's close, the stock is up 25% since the start of the year.
Packaging Corp. shares were up 8.4% to $59.15 in premarket
trading.
Boise, based in Boise, Idaho, manufactures a variety of
packaging and paper products. Its packaging products include
linerboard and corrugating medium, corrugated containers and
sheets, while its paper products include imaging papers for the
office and home, printing and converting papers, and papers used in
packaging.
Packaging Corp. Executive Chairman Paul Stecko said the Boise
acquisition provides the company with the containerboard it needs
to support its strong corrugated products growth.
As a result of the deal, Packaging Corp.'s containerboard
capacity will increase 42% to 3.7 million tons while its corrugated
products volume will increase by about 30%. Additionally, the
company's market presence will expand into the Pacific Northwest.
The acquisition is expected to add to earnings immediately.
The combined companies generated $5.5 billion in sales and $879
million in earnings before interest, taxes, depreciation and
amortization, excluding special items, in the 12 months ended June
30.
While decent demand for packaging has allowed for increased
prices, Boise has been hurt lately by continued weakness in paper
sales. Boise's Chair Carl Albert said the company has thoroughly
evaluated a range of strategic options and believes this deal is
the best way to maximize shareholder value.
Meanwhile, Packaging Corp.'s sales volume and revenue have been
helped in recent quarters by strong demand, though the company's
bottom line has wrestled against raw-material costs.
Write to Nathalie Tadena at nathalie.tadena@wsj.com
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