425: Berry Global Upsizes Senior Secured Notes Offering to $800 Million for Glatfelter Merger

Berry Global Group, Inc. has increased its senior secured notes offering to $800 million to finance the merger of its Health, Hygiene and Specialties Global Nonwovens and Films business with Glatfelter Corporation.

Summary

• Berry Global Group, Inc. announced the pricing and upsizing of its private offering of senior secured notes due 2031 to $800 million.
• The notes will be issued by Treasure Escrow Corporation, a wholly-owned subsidiary of Berry.
• The offering is related to the previously announced merger of Berry's Health, Hygiene and Specialties Global Nonwovens and Films business with Glatfelter Corporation in a Reverse Morris Trust transaction.
• The combined company will be renamed Magnera Corporation, and it will assume the obligations of the notes.
• The notes will bear interest at a rate of 7.250%, payable semi-annually, commencing on April 15, 2025, and will mature on November 15, 2031.
• The closing of the offering is expected on or about October 25, 2024, subject to customary closing conditions.
• The proceeds will be used to fund a cash distribution to BGI, repay certain existing indebtedness of Glatfelter, and pay certain fees and expenses.
• The notes will be secured by liens on certain assets of Magnera and its subsidiaries.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive as the company is securing financing for a strategic merger, but there are inherent risks associated with debt and the completion of the transaction.

Positives

• The upsized offering provides additional capital for the merger with Glatfelter.
• The notes offering replaces a term loan facility, potentially offering more favorable terms.
• The notes are secured by liens on assets of Magnera, providing some security for investors.

Negatives

• The notes are not obligations of Berry or its wholly-owned subsidiary Berry Global, Inc. (BGI) until the Magnera Assumption.
• The notes are structurally subordinated to all the liabilities of Magnera's subsidiaries that are not or do not become Subsidiary Guarantors.
• The notes are subject to escrow release conditions that must be satisfied substantially concurrently with the consummation of the Transaction.

Risks

• The closing of the offering is subject to customary closing conditions.
• The merger with Glatfelter may not be completed.
• The anticipated tax treatment of the proposed Transaction may not be obtained.
• There are risks related to potential litigation brought in connection with the proposed Transaction.
• The integration of the combined company may be more difficult, time consuming or costly than expected.
• 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

The document outlines the expected closing of the notes offering and the completion of the merger between Berry's Health, Hygiene and Specialties Global Nonwovens and Films business with Glatfelter, resulting in the formation of Magnera Corporation.

Industry Context

The transaction reflects a trend of consolidation and strategic realignment within the nonwovens and specialty materials industry, as companies seek to enhance their market position and capabilities.

Comparison to Industry Standards

• Comparable companies in the nonwovens sector include Ahlstrom-Munksjo and Suominen, which have also engaged in strategic acquisitions and divestitures to optimize their portfolios.
• The 7.250% interest rate on the notes is within the typical range for senior secured debt in the current market environment, but the specific terms would depend on Magnera's credit rating and the overall risk assessment by investors.
• Reverse Morris Trust transactions are a common structure for separating businesses in a tax-efficient manner, as seen in other deals such as the merger of Dow's chlorine products business with Olin Corporation.

Stakeholder Impact

• Shareholders of Berry and Glatfelter will be impacted by the merger and the creation of Magnera Corporation.
• Employees of Berry's Health, Hygiene and Specialties Global Nonwovens and Films business and Glatfelter will be integrated into the new company.
• Customers of both companies will be served by the combined entity.
• Creditors of Glatfelter will see some of their existing indebtedness repaid with the proceeds from the notes offering.

Next Steps

• Closing of the senior secured notes offering, expected on or about October 25, 2024.
• Completion of the merger between Berry's Health, Hygiene and Specialties Global Nonwovens and Films business with Glatfelter.
• Assumption of the notes obligations by Magnera Corporation upon closing of the transaction.

Key Dates