425: Berry Global Subsidiary Announces $500 Million Senior Secured Notes Offering to Fund Glatfelter Merger

Berry Global Group's subsidiary, Treasure Escrow Corporation, plans to offer $500 million in senior secured notes due 2031 to help finance the merger of Berry's Health, Hygiene and Specialties Global Nonwovens and Films business with Glatfelter Corporation.

Summary

• Berry Global Group, Inc. has announced that its subsidiary, Treasure Escrow Corporation, is offering $500 million in senior secured notes due 2031.
• The proceeds will fund a portion of the cash distribution to Berry Global, Inc. related to the combination of Berry's Health, Hygiene and Specialties Global Nonwovens and Films business with Glatfelter Corporation in a Reverse Morris Trust transaction.
• Upon closing, the combined company will be named Magnera Corporation.
• The notes will be offered to qualified institutional buyers and non-U.S. investors.
• Glatfelter's existing 4.75% Senior Notes due 2029 will remain outstanding and be secured equally with Magnera's new term loan and the new notes.
• Magnera is expected to generate pro forma revenue of approximately $3.5 billion and pro forma Adjusted EBITDA of approximately $455 million based on combined results for the last twelve months period ended June 29, 2024, inclusive of synergies.
• Magnera expects run-rate cost synergies of $55 million and combined pro forma adjustments of $12 million to be realized by the end of the third full year after the completion of the Transactions.

Sentiment

Score: 7

Explanation: The document presents a positive outlook for the merger between Berry Global's HHNF business and Glatfelter, highlighting expected synergies, market leadership, and financial benefits. While risks are acknowledged, the overall tone is optimistic about the future performance of Magnera Corporation.

Positives

• The merger is expected to create a leading global competitor in the specialty materials industry.
• The combined company will have a highly complementary product portfolio.
• Significant geographic diversification is expected.
• The merger is expected to increase business scale, allowing for investment in new technologies and accelerated innovation.
• Significant cost synergies of $55 million are expected.
• The transaction is structured as a tax-efficient Reverse Morris Trust.

Negatives

• The offering is subject to market and other conditions.
• The notes have not been registered under the Securities Act and may not be offered or sold in the United States without registration or an applicable exemption.
• There is no assurance that the expected synergies will be realized on the time frame described or at all.
• To preserve the tax-free treatment of the Spinco Distribution and any related transactions, Magnera will be required to abide by certain restrictions that could limit its ability to engage in certain future business transactions that may otherwise be advantageous.

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 related to potential litigation brought in connection with the proposed Transaction.
• Uncertainties as to the timing of the consummation of the proposed transactions.
• Unexpected costs, charges or expenses resulting from the proposed transactions.
• 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

Magnera is expected to be a leading global provider in the specialty materials industry, with a focus on innovation and sustainability. The company anticipates higher demand for products with lower emissions intensity.

Management Comments

• Leading Magnera will be a highly experienced, world-class management team focused on value creation.
• The senior management team will be led by a tenured group of industry veterans with expertise across various functions, committed to driving results.

Industry Context

The global nonwovens and specialty materials industry is experiencing growth driven by increasing demand for hygiene products, a post-pandemic focus on infection prevention, and the need for improved air and water quality. Magnera estimates its total addressable market to be forty-billion dollars.

Comparison to Industry Standards

• The document states that the global nonwovens and specialty materials industry is heavily fragmented.
• Few competitors compete with Magnera on all substrates and in all geographies.
• The combination of Glatfelter's and the HHNF Business' highly complementary product suite, including both polymer-based and fiber-based solutions, positions Magnera as a leading global competitor in the specialty materials industry.
• The Combined Company's size and full-suite product offering gives it an unparalleled advantage in the industry.

Management Changes

Legal Proceedings

• The HHNF Business is party to various legal proceedings involving routine claims, which are incidental to its business.

Stakeholder Impact

• Shareholders of Berry and Glatfelter will be impacted by the merger and the associated changes in ownership and company structure.
• Employees of Berry's HHNF business and Glatfelter will be integrated into the new Magnera Corporation, potentially leading to changes in roles and responsibilities.
• Customers of Berry and Glatfelter will have access to a broader range of products and services from the combined company.
• The combined company is expected to be a leader in sustainability, collaborating across the value chain to achieve a more circular economy.

Next Steps

• Glatfelter shareholders must approve the proposals regarding the issuance of shares of Glatfelter common stock to Spinco stockholders in the Merger, and the proposals regarding the amendment of Glatfelter's amended and restated articles of incorporation, including the increase in the number of authorized shares of Glatfelter common stock and to give effect to a reverse stock split.
• The closing of the offering of the Notes is subject to market and other conditions.
• The completion of the merger is subject to customary closing conditions and regulatory approvals.

Key Dates