425: Berry Global and Glatfelter Achieve Regulatory Milestone in Proposed Transaction

Berry Global and Glatfelter announced the expiration of the HSR Act waiting period, a key regulatory milestone, in their proposed transaction to combine Berry's Health, Hygiene and Specialties segment with Glatfelter.

Summary

• Berry Global Group, Inc. and Glatfelter Corporation announced that the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act has expired, marking a regulatory milestone in their proposed transaction.
• The transaction involves Berry spinning off and merging its Health, Hygiene and Specialties segment (HHNF) with Glatfelter in a Reverse Morris Trust transaction.
• This merger aims to create a leading publicly-traded company in the specialty materials industry.
• The transaction is expected to close in the second half of calendar 2024, pending Glatfelter shareholder approval and customary closing conditions.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive as a key regulatory hurdle has been cleared, but the deal is still subject to shareholder approval and other conditions. There are also integration risks to consider.

Positives

• The expiration of the HSR Act waiting period indicates progress in obtaining regulatory approvals.
• The combined company is expected to become a leading player in the specialty materials industry.
• The Reverse Morris Trust structure can be tax-efficient for Berry Global shareholders.
• The merger could lead to synergies and cost savings for the combined entity.

Negatives

• The transaction is still subject to Glatfelter shareholder approval and customary closing conditions, creating uncertainty.
• Integration of the two businesses could present challenges and unexpected costs.
• Potential litigation related to the transaction could delay or derail the deal.

Risks

• Failure to obtain Glatfelter shareholder approval could terminate the transaction.
• Regulatory approvals may be delayed or obtained with conditions that are not anticipated.
• The anticipated tax treatment of the transaction may not be obtained.
• Potential litigation could arise in connection with the proposed transaction.
• Integration of the combined company may be more difficult, time-consuming, or costly than expected.
• Disruption of management time from ongoing business operations due to the proposed transaction could negatively impact performance.
• Failure to retain customers and key personnel could impact operating results and businesses generally.

Future Outlook

The transaction is expected to close in the second half of calendar 2024, subject to Glatfelter shareholder approval and customary closing conditions. The combined company aims to be a leading player in the specialty materials industry.

Industry Context

The transaction reflects a trend of consolidation in the specialty materials industry, as companies seek to gain scale and improve their competitive positioning. This merger would create a larger, more diversified player in the nonwovens and hygiene films market, potentially impacting competitors like Ahlstrom-Munksjö and Suominen.

Comparison to Industry Standards

• Glatfelter's $1.4 billion revenue in 2023 provides a benchmark for assessing the combined entity's potential market position.
• Comparatively, Ahlstrom-Munksjö, another player in the fiber-based materials industry, reported net sales of approximately EUR 3.3 billion in 2023.
• The success of the merger will depend on achieving synergies and integrating the two businesses effectively, similar to other large-scale mergers in the industry, such as the merger between International Paper and Temple-Inland in the paper and packaging sector.

Management Changes

Stakeholder Impact

• Shareholders of Glatfelter will vote on the proposed transaction.
• Employees of both Berry Global and Glatfelter may experience changes as a result of the merger.
• Customers of both companies could benefit from a broader range of products and services.
• Suppliers to both companies may see changes in their relationships as a result of the merger.

Next Steps

• Glatfelter shareholders need to approve the transaction.
• The parties need to satisfy customary closing conditions.
• The companies will work towards integrating the two businesses after the transaction closes.

Key Dates