More consolidation in containerboard

Packaging Corp. of America (PCA) has agreed to acquire the containerboard business of Delaware, Ohio-based packaging company Greif Inc. in a deal worth $1.8 billion.

The transaction is expected to close by the end of PCA’s third quarter this year, and Greif officials say the move is fully aligned with its “Build to Last” strategy.

Selling its containerboard business “unlocks immediate value” for its shareholders, Greif President and CEO Ole Rosgaard says. “It represents a pivotal step in our work to sharpen our portfolio, enhance our capital efficiency and advance our growth priorities.”

"The mills nicely complement PCA’s system and will provide containerboard to support PCA’s continued corrugated products growth.” –Mark Kowlzan, CEO, Packaging Corp. of America

Greif’s containerboard business includes two mills, one in Gladstone, Virginia, and another in Massillon, Ohio, both of which make recycled packaging and have a combined capacity of about 800,000 tons annually.

It also includes eight sheet feeder and corrugated facilities across the U.S.

According to the company’s latest earnings report, its containerboard business generated about $1.2 billion in sales and $212 million in earnings before interest, taxes, depreciation and amortization for the 12 months ending April 30.

“The mills nicely complement PCA’s system and will provide containerboard to support PCA’s continued corrugated products growth,” PCA CEO Mark Kowlzan says. “We expect to achieve significant synergies with minimal capital investment through our operational expertise and will identify even more opportunities within the combined system for future high return investments to grow with our corrugated and sheet feeder customers.”

PCA is the third-largest containerboard producer by capacity in North America and operates eight mills and 86 corrugated products facilities and related sites.

According to a Reuters report, this latest deal boosts the Lake Forest, Illinois-based company’s containerboard capacity to approximately 6 million tons annually.

This marks the third major packaging acquisition in the last year and, notably, the first to be entirely focused in North America.

In July 2024, Dublin-based Smurfit Kappa completed its $11 billion acquisition of Atlanta-based Westrock, then in February of this year, Memphis, Tennessee-based International Paper (IP) acquired London-based DS Smith in a deal worth $7.2 billion.

The U.S. corrugated box business generates up to $42 billion per year, according to Fibre Box Association figures cited by Fastmarkets RISI.

According to Fastmarkets, assuming the PCA-Greif transaction is completed, these three deals would have a combined cost of about $20 billion and would represent the most paid in a year in containerboard merger and acquisition activity.

Including Greif, PCA would remain the third-largest containerboard producer in North America behind IP and Smurfit Westrock, according to Fastmarkets figures. IP’s containerboard capacity is about 29 percent, and Smurfit Westrock’s is about 20 percent. With the acquisition, PCA would increase to nearly 16 percent, and the combined share of the largest three companies would be about 65 percent of the more than 40 million tons per year of regional containerboard capacity in the U.S.

For Greif, it expects the move to allow it to deliver more durable earnings, enhance capital utilization, reduce recurring capital needs and enable debt reduction. Cash proceeds will be allocated to debt repayment.

Meanwhile, PCA is expected to finance the transaction with $1.5 billion of new debt and cash on hand.

PCA also says synergies are estimated to generate pretax benefits of approximately $60 million and are expected to be fully realized within two years after closing. The synergies are projected to come from improved operational and production capabilities and efficiencies at the mills, increased integration, mill grade optimization and lower transportation costs. About half the benefits are expected by the end of the first year, with the remainder expected by the end of the second year.