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

Berry Global Group's subsidiary, Treasure Escrow Corporation, is offering $500 million in senior secured notes to finance a portion of the cash distribution related to 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 indirect, wholly-owned subsidiary, Treasure Escrow Corporation, is commencing an offering of $500 million in senior secured notes due in 2031.
• The offering is subject to market conditions and other factors.
• The proceeds from the notes will be used to fund a portion of the cash distribution to Berry Global, Inc. by Treasure Holdco, Inc. (Spinco) in connection with the previously announced combination of Berry's Health, Hygiene and Specialties Global Nonwovens and Films business with Glatfelter Corporation in a Reverse Morris Trust transaction.
• The funds will also be used to repay certain existing indebtedness of Glatfelter and to pay certain fees and expenses.
• Upon closing of the transaction, the combined company will be renamed Magnera Corporation.
• The issuance of the notes will replace the same amount of debt previously intended to be provided under Spinco's new credit facilities, which will be assumed by Magnera.
• Glatfelter's existing 4.75% Senior Notes due 2029 will remain outstanding and will be secured on an equal and ratable basis with Magnera's new term loan credit facility and the notes.
• The notes are being offered to qualified institutional buyers under Rule 144A of the Securities Act of 1933 and to non-U.S. investors pursuant to Regulation S.
• The notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption.

Sentiment

Score: 7

Explanation: The document is generally positive, outlining a strategic merger and associated financing. While there are inherent risks in any transaction, the overall tone is optimistic about the future prospects of the combined company.

Positives

• The merger of Berry's Health, Hygiene and Specialties Global Nonwovens and Films business with Glatfelter is expected to create a leading global competitor in the specialty materials industry.
• The combined company, Magnera, is expected to have 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.
• 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.
• The transaction is structured as a Reverse Morris Trust, providing a tax-efficient method to combine Glatfelter and the HHNF Business.

Negatives

• The notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption.
• The offering is subject to market and other conditions.
• The realization of expected synergies is not assured and depends on successful integration efforts.

Risks

• The occurrence of any event, change, or other circumstances that could give rise to the termination of the proposed transaction.
• The risk that Glatfelter shareholders may not approve the transaction proposals.
• The risk that 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.
• The risk that the offering and issuance of the notes may not be effected on terms that are advantageous to the Issuer, Spinco or, after the closing of the Transaction, Magnera, or at all.

Future Outlook

Magnera expects to be a leader in sustainability and is well-positioned to provide innovative, eco-friendly solutions. 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 management teams extensive and proven track record of success within the sector is expected to serve to further Magneras position as a global leader in the nonwovens and specialty materials industry.

Industry Context

The global nonwovens and specialty materials industry serves a variety of end markets including hygiene, healthcare, automotive, construction, and filtration. Magnera estimates its total addressable market to be forty-billion dollars.

Comparison to Industry Standards

• 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 Glatfelters 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 Companys 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 impacted by the integration of the two companies, including potential changes in roles and responsibilities.
• Customers of Berry's HHNF Business and Glatfelter can expect a broader range of products and services from the combined company.
• The combined company will own and operate the HHNF Business through Spinco and will also continue Glatfelters current businesses.

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 Glatfelters 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 is contingent on market and other conditions.
• The completion of the merger between Glatfelter and Berry's HHNF Business.

Key Dates