Sonoco to Snap up Ball Metalpack for $1.35B; Shares Drop 6.3%

Sonoco (NYSE: SON) has inked a deal to acquire Ball Metalpack in an- all-cash transaction worth $1.35 billion.

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Based in the U.S., Sonoco is a global provider of diversified consumer packaging, industrial products, protective packaging, and packaging supply chain services. It is also the world’s largest producer of composite cans, tubes, and cores.

Following the news, shares of the company dropped 6.3% to close at $14.46 on December 20.

Synergies from the Acquisition

Founded in 2018, Ball Metalpack is a leading manufacturer of sustainable metal packaging for food and household products, as well as the largest aerosol producer in the U.S. It is a joint venture company co-owned by Platinum Equity (51%) and Ball Corporation (NYSE: BLL) (49%).

The addition of Ball Metalpack will complement Sonoco’s extensive consumer packaging franchise, and enhance its sustainable packaging portfolio with metal packaging.

Sonoco expects to realize tax benefits with a net present value of approximately $180 million. Furthermore, Sonoco will realize at least $20 million in annual synergies as a result of procurement and SG&A savings within three years.

The deal is expected to be immediately accretive to earnings per share in 2022. Furthermore, incremental accretion is predicted in 2023 from synergies, new business development as well as productivity improvements resulting from recent investments. The deal price implies a multiple of 8.9x Ball Metalpack’s 2021 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

Terms of the Deal

Sonoco will fund the deal through a $1.0 billion senior unsecured bridge loan facility from JPMorgan Chase Bank. Before completion, the company plans to replace the bridge facility with permanent financing, which may include the issuance of debt securities and a term loan facility.

Upon completion, Ball Metalpack will become a part of the company’s Consumer Packaging segment.

The acquisition is expected to close in the first quarter of 2022, subject to certain regulatory approvals.

CEO Comments

Sonoco CEO, Howard Coker, commented, “With a comprehensive and innovative product portfolio that has received significant recent investments in new technology and capacity, we believe the addition of Ball Metalpack will further strengthen our stable cash flow generation while driving solid earnings accretion.”

Analysts Recommendation

On December 13, Robert W. Baird analyst Ghansham Panjabi maintained a Hold rating on Sonoco with the price target of $68 (23.6% upside potential).

Overall, the stock has a Hold consensus rating based on 5 Holds and 1 Sell. The Sonoco stock price prediction of $65.40 implies 18.9% upside potential from current levels.

Bloggers Weigh In

TipRanks data shows that financial blogger opinions are 100% Bullish on SON, compared to a sector average of 68%.