425: Glatfelter Provides Update on Proposed Merger with Berry's HHNF Business

Glatfelter Corporation provides an update on its proposed merger with Berry Global's Health, Hygiene & Specialties Division (HHNF), outlining integration planning and addressing employee questions.

Summary

• Glatfelter and Berry Global are progressing with integration planning for the merger of Glatfelter and Berry's HHNF business.
• An integration team, led by Dave Elder, has been formed to determine the organizational structure of the new company (NewCo), including the Board of Directors, executive management team, and branding.
• The integration team will work to formalize the operational structure, considering that NewCo will consist of 45 sites with over 8,500 employees.
• Curt Begle, the named CEO of NewCo, has visited Glatfelter Headquarters and will visit Glatfelter sites in the near future.
• Glatfelter will continue to operate as a stand-alone company until the proposed transaction closes, expected in the second half of 2024.
• Proforma revenue for NewCo is estimated to be approximately $3.6 billion with proforma adjusted EBITDA of approximately $455 million, based on combined results for the last twelve-months period ended December 2023 for Berry, and September 2023 for Glatfelter.
• The proposed transaction is expected to improve Glatfelter's leverage profile to a proforma net leverage of 4x.

Sentiment

Score: 7

Explanation: The document conveys a positive outlook regarding the merger, emphasizing strategic benefits and growth opportunities. However, it also acknowledges potential risks and uncertainties associated with the transaction.

Positives

• The merger is expected to provide a strong foundation for growth and increase the equity value of the overall enterprise.
• The transaction is expected to deleverage Glatfelter's balance sheet.
• The merger is expected to improve Glatfelter's leverage profile.
• The combined company will have an expanded nonwovens portfolio with complementary polymer-based and fiber-based products.
• The Phoenix project remains relevant to Glatfelter and NewCo.

Risks

• The integration process may be more difficult, time-consuming, or costly than expected.
• The announcement, pendency, or completion of the proposed transaction could disrupt the parties' ability to retain customers and key personnel.
• The transaction is subject to regulatory approvals and other closing conditions that may not be satisfied in a timely manner.
• There are risks related to potential litigation brought in connection with the proposed transaction.

Future Outlook

The document expresses optimism about the potential opportunities for the company's long-term growth following the merger. The transaction is expected to close in the second half of 2024.

Management Comments

• Thomas Fahnemann states that the proposed transaction provides several meaningful strategic benefits for Glatfelter.
• Curt Begle is described as being very complimentary of the Glatfelter team and excited for the potential that exists by combining the two organizations.

Industry Context

This announcement reflects a trend of consolidation in the nonwovens industry, with companies seeking to expand their product portfolios, leverage synergies, and improve their financial profiles.

Comparison to Industry Standards

• It is difficult to compare the pro forma metrics to industry standards without knowing the specific product mix and end markets of NewCo.
• However, a 4x leverage ratio is generally considered acceptable in the paper and packaging industry, but it depends on the stability of the cash flows and the growth prospects of the business.
• Comparable companies in the nonwovens space include Ahlstrom-Munksjo and Suominen, but their financial profiles may differ significantly due to variations in their business models and geographic footprints.

Management Changes

Stakeholder Impact

• Shareholders will be impacted by the increased equity value and deleveraged balance sheet.
• Employees may experience changes in employment conditions and programs as the integration progresses.
• Customers can expect a broader product offering and solutions from the combined company.
• Suppliers may see changes in their relationships with the company as a result of the merger.

Next Steps

• The integration team will continue to determine the organizational structure of NewCo.
• Curt Begle will visit Glatfelter sites.
• Glatfelter will continue to operate as an independent company until the transaction closes.
• Periodic updates will be provided on the progress of the integration.

Key Dates