8-K: Glatfelter Addresses Shareholder Lawsuits, Provides Supplemental Disclosures for Berry Merger

Glatfelter Corporation has supplemented its proxy statement/prospectus with additional disclosures to address shareholder lawsuits and demand letters related to its merger with Berry Global's HHNF business.

Summary

• Glatfelter Corporation is facing lawsuits and demand letters from shareholders alleging insufficient disclosures in the proxy statement/prospectus related to the merger with Berry Global's HHNF business.
• To address these concerns and avoid potential disruptions, Glatfelter has voluntarily provided supplemental disclosures.
• The supplemental disclosures include additional details about board meetings, discussions with potential partners, and financial analysis conducted by J.P. Morgan.
• The company's board of directors continues to recommend that shareholders vote in favor of the proposed merger.
• The supplemental disclosures amend sections of the proxy statement/prospectus regarding the background of the transactions and the opinion of Glatfelter's financial advisor.
• J.P. Morgan performed a discounted cash flow analysis of Glatfelter, Spinco, and the synergies, providing ranges of equity values.
• Glatfelter's standalone equity value was estimated between $55 million and $245 million, while Spinco's equity value was estimated between $1,500 million and $2,235 million.
• The implied equity value of the synergies was estimated to be approximately $619 million.
• The document also includes a cautionary statement regarding forward-looking statements and urges shareholders to read all relevant documents filed with the SEC.

Sentiment

Score: 4

Explanation: The document addresses negative feedback from shareholders and the need for supplemental disclosures, which suggests underlying issues with the initial transaction communication. While the company is taking steps to mitigate the issues, the overall sentiment is cautious.

Positives

• Glatfelter is proactively addressing shareholder concerns by providing supplemental disclosures.
• The company is taking steps to avoid potential disruptions to the merger process.
• The board of directors continues to support the proposed merger.

Negatives

• Shareholder lawsuits and demand letters indicate concerns about the initial disclosures.
• The need for supplemental disclosures suggests potential weaknesses in the original proxy statement/prospectus.

Risks

• The lawsuits and demand letters could potentially delay or disrupt the merger.
• There is a risk that shareholders may not approve the transaction proposals.
• The company faces risks related to the integration of the combined company.
• There are risks related to the separation of the HHNF Business into Spinco.
• The company faces risks related to financial community and rating agency perceptions.

Future Outlook

The document includes forward-looking statements regarding the expected timing, completion, and effects of the proposed transaction, but cautions that actual results may differ due to various factors. The company does not undertake any obligation to update or revise any forward-looking statement.

Management Comments

• The Glatfelter Board discussed the proposed responses to the issues identified and authorized King & Spalding to return revised drafts of the transaction documents based on the suggested responses.
• The Glatfelter Board authorized the members of Glatfelter's senior management and the advisors to continue their work with Berry on the proposed transaction and also to continue engaging with Party A.
• The Glatfelter Board unanimously determined that the March 2, 2024, e-mail communication did not provide a basis for any discussions with Party B.
• The Companys board of directors continues to recommend unanimously that you vote FOR the proposals being considered at the Companys special meeting of shareholders.

Industry Context

This announcement is related to a significant merger within the nonwovens and hygiene films industry, where consolidation and strategic partnerships are common. The merger aims to create a larger, more competitive entity by combining Glatfelter and Berry's HHNF business.

Comparison to Industry Standards

• The document provides comparable transaction multiples for similar acquisitions in the nonwovens industry, such as Glatfelter's acquisition of Jacob Holm at 10.1x LTM EBITDA and Berry Global's acquisition of Avintiv Inc. at 8.1x LTM EBITDA.
• The discounted cash flow analysis uses discount rates of 10.5% to 11.5% for Glatfelter, 8.5% to 9.5% for Spinco, and 9.1% to 10.1% for synergies, which are within the typical range for such analyses in the industry.
• The perpetual growth rates of 1.5% to 2.5% used in the terminal value calculations are also consistent with industry practices.

Legal Proceedings

• Kyle Williams v. Glatfelter Corporation, et al., was filed in the Supreme Court of the State of New York, New York County.
• Robert Wilhelm v. Glatfelter Corporation, et al., was filed in the Supreme Court of the State of New York, New York County.
• The Complaints seek, among other relief, an injunction enjoining defendants from consummating the Transactions unless the Company discloses the material information allegedly omitted from the Proxy Statement/Prospectus, rescission of the Transactions in the event it is consummated without the Company disclosing the material information allegedly omitted from the Proxy Statement/Prospectus, and an award of costs including attorneys and experts fees and expenses.

Stakeholder Impact

• Shareholders are impacted by the lawsuits and the need for supplemental disclosures.
• Employees may be affected by the merger and the integration of the two companies.
• Customers and suppliers may be impacted by the changes resulting from the merger.

Next Steps

• Glatfelter shareholders will vote on the proposed merger.
• The company will continue to address any additional complaints or demand letters.
• The company will work towards completing the merger with Berry Global.

Key Dates

Keywords

merger, Glatfelter, Berry Global, HHNF Business, Magnera Corporation, shareholder lawsuits, proxy statement, supplemental disclosures, discounted cash flow analysis, Spinco, synergies