425: Berry Global and Glatfelter Waive Key Conditions for Nonwovens Business Spin-Off and Merger

Berry Global and Glatfelter have waived conditions related to the IRS ruling and tax counsel opinions, moving forward with the spin-off of Berry's HHNF business and its subsequent merger with Glatfelter.

Summary

• Berry Global Group, Inc. and Glatfelter Corporation have waived conditions to closing their previously announced transaction involving the spin-off of Berry's global nonwovens and hygiene films business (HHNF Business) and its merger with a subsidiary of Glatfelter.
• The waived conditions relate to the receipt of a private letter ruling from the IRS and the delivery of opinions from tax counsel regarding the tax treatment of the transaction.
• Glatfelter will be renamed Magnera Corporation upon closing of the transaction.
• An amendment to the Tax Matters Agreement was entered into by Glatfelter, Berry, and Spinco to reflect the waivers and clarify liabilities for transaction taxes.
• Berry believes that any taxable gain recognized by Berry, if any, would be immaterial based on Berry's adjusted tax basis in the HHNF Business.
• A supplement to the Form 10 registration statement was filed by Spinco to reflect the waivers.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive as the waiver of conditions suggests progress towards the completion of the transaction. However, some uncertainty remains regarding the tax implications and potential risks associated with closing conditions and regulatory approvals.

Positives

• The waiver of conditions suggests increased confidence in the transaction's progression.
• Berry's belief that any taxable gain would be immaterial mitigates potential negative financial impacts.
• The amendment to the Tax Matters Agreement provides clarity on tax liabilities.

Negatives

• The waiver of the IRS ruling condition introduces some uncertainty regarding the tax treatment of the transaction, although Berry believes any taxable gain would be immaterial.
• The transaction is still subject to closing conditions and regulatory approvals, which could pose risks.

Risks

• The occurrence of any event, change, or other circumstances that could give rise to the termination of the proposed transaction.
• The risk that the Glatfelter shareholders may not approve the transaction proposals.
• The risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated or may be delayed.
• Risks that any of the other closing conditions to the proposed transaction may not be satisfied in a timely manner.
• Risks that the anticipated tax treatment of the proposed transaction is not obtained.
• Risks related to potential litigation brought in connection with the proposed transaction.
• Uncertainties as to the timing of the consummation of the proposed transaction.
• Unexpected costs, charges or expenses resulting from the proposed transaction.
• Risks and costs related to the implementation of the separation of the HHNF Business into Spinco, including timing anticipated to complete the separation.
• The risk that the integration of the combined company is more difficult, time consuming or costly than expected.
• Risks related to disruption of management time from ongoing business operations due to the proposed transaction.
• Failure to realize the benefits expected from the proposed transaction.
• Effects of the announcement, pendency or completion of the proposed transaction on the ability of the parties to retain customers and retain and hire key personnel and maintain relationships with their counterparties, and on their operating results and businesses generally.

Future Outlook

The document outlines the continued progression towards the completion of the spin-off and merger, with the expectation of closing the transaction after satisfying remaining conditions.

Management Comments

• Berry believes that, in the event that the Spinco Distribution was determined to be taxable to Berry, the taxable gain recognized by Berry, if any, would be immaterial based on Berry's adjusted tax basis in the HHNF Business.

Industry Context

This announcement reflects ongoing consolidation and restructuring activities within the nonwovens and hygiene films industry, as companies seek to optimize their portfolios and enhance shareholder value.

Comparison to Industry Standards

• Similar spin-off and merger transactions in the materials and manufacturing sectors often involve waivers of certain conditions to expedite the closing process.
• Companies like DowDuPont and Chemours have undertaken similar restructuring activities to streamline operations and focus on core businesses.
• The tax implications of such transactions are closely scrutinized, and companies typically seek tax opinions to ensure compliance and minimize potential liabilities.

Stakeholder Impact

• Shareholders of Berry will receive shares of Magnera Corporation.
• The transaction is expected to create value for both Berry and Glatfelter shareholders.
• Employees of the HHNF Business will become part of Glatfelter (Magnera Corporation).

Next Steps

• Distribution of the definitive information statement/prospectus to Berry stockholders receiving Magnera common stock.
• Effective date of the Form 10 registration statement.
• Completion of the Spin-Off and the Transactions.

Key Dates