Graphic Packaging to sell paperboard manufacturing facility to Clearwater Paper for $700m

In a significant move within the paperboard manufacturing sector, Graphic Packaging Holding Company (NYSE:GPK), henceforth referred to as Graphic Packaging, has entered into a definitive agreement with Clearwater Paper Corporation (NYSE: CLW), known as Clearwater Paper, for the sale of its Augusta, Georgia bleached paperboard manufacturing facility. The transaction, valued at approximately $700 million, is based on an Adjusted EBITDA of around $100 million, underscoring the financial robustness of the asset involved.

Graphic Packaging’s President and Chief Executive Officer, Michael Doss, emphasized the strategic rationale behind the decision, stating, “Augusta is an outstanding asset with a great team, which we concluded is a more compelling fit with Clearwater Paper’s strategic growth plans than our own. Bleached paperboard plays a major role in sustainable consumer packaging, and we will continue to service growing foodservice and packaging demand with bleached paperboard from our Texarkana facility.” This quote underscores the strategic realignment of Graphic Packaging’s operational focus while highlighting the continuing importance of sustainable packaging solutions in their portfolio.

From Clearwater Paper’s perspective, the acquisition is a strategic enhancement. Arsen Kitch, Clearwater Paper’s Chief Executive Officer, remarked on the acquisition’s fit with the company’s growth strategy, “Augusta is a great fit with our strategy and improves our position as a premier, independent paperboard supplier to North American converters. I look forward to welcoming the Augusta team to Clearwater Paper as we work together to build a more scaled paperboard business to service our customers.” This acquisition not only signifies Clearwater Paper’s commitment to expanding its market footprint but also stresses the importance of team integration and customer service enhancement in its growth trajectory.

The transaction is poised for closure in the second quarter of 2024, pending regulatory approvals. It has garnered the support of notable financial and legal advisors, with TD Securities advising Clearwater Paper and BofA Securities backing Graphic Packaging. Legal counsel for the transaction includes Pillsbury, Winthrop, Shaw, Pittman LLP, and Stoel, Rives LLP for Clearwater Paper, and Alston & Bird LLP for Graphic Packaging, highlighting the comprehensive expert support backing this significant industry move.

This sale marks a pivotal moment in the paperboard industry, reflecting broader trends towards consolidation and strategic realignment among key players. It not only signifies a substantial financial transaction but also a strategic shift with potential long-term implications for sustainable packaging solutions and industry dynamics. The Augusta facility’s transition to Clearwater Paper is expected to bolster its strategic position as a leading paperboard supplier, while Graphic Packaging continues to focus on its core areas of growth, leveraging its Texarkana facility to meet the increasing demand for sustainable consumer packaging.

This transaction between Graphic Packaging and Clearwater Paper exemplifies strategic maneuvering within the competitive paperboard industry. It showcases how companies are realigning their assets and capabilities to better match their long-term growth objectives and respond to market demands for sustainable packaging solutions. The substantial investment by Clearwater Paper highlights the value placed on strategic assets that can enhance operational scale and market reach, indicating a positive outlook for the paperboard sector’s growth and sustainability trends.