This transaction, which will be immediately earnings accretive, will involve an initial consideration of $150 million with a further estimated deferred payment of $7.5 million. The acquisition is expected to complete in the 4Q 2014 subject to customary regulatory approval, with funding from existing cash reserves. The pro forma 2014 EBITDA for Bates is expected to be $18.5 million and the Group has identified synergies of $11.5 million which it expects to deliver within 24 months of completion. Inclusive of synergies, the transaction will carry a pro-forma multiple of 5.25 times EBITDA.
Tony Smurfit, Smurfit Kappa Group COO stated, “This acquisition fits perfectly with our integrated model, complementing in a significant way the successful integration of SKOC which was acquired in December 2012 and providing us with substantial scope for further synergies in both businesses. These synergies will be primarily delivered through additional integration of the containerboard needs of Bates into SKOC’s 350,000 tonnes recycled containerboard mill, with additional savings expected through a range of operational efficiency measures. Importantly, the Group’s enlarged packaging footprint in the US will further enhance SKG’s capacity to provide innovative, insight-led and value enhancing packaging solutions to both current and prospective customers”.
Bates is a long-established highly regarded private corrugated manufacturer strategically positioned to serve and grow its customer base in the wider Texas region by delivering high quality differentiated packaging solutions. Bates employs 320 people and a substantial element of its approximately 135,000 tonnes of containerboard requirement will be supplied by Smurfit Kappa Orange County’s (‘SKOC’) containerboard mill in Dallas.
