Goldman Sachs Comments On Boise Inc. Following Tharco Packaging Acquisition

Boise BZ announced that it has agreed to acquire Tharco Packaging, Inc., for $200 mn in an all-cash transaction that BZ expects will close in early March 2011. BZ expects the acquisition will be accretive in the first year. Tharco operates three business segments: corrugated converting, stock boxes, and multi-material engineered packaging solutions. Tharco's corrugated converting business shipped approximately 2.3 bn sq. feet in FY2010 ended 9/30/2010 and operates three corrugated and three sheet plants. According to the press release and BZ, Tharco generated revenue of $261 mn and EBITDA $27 mn in FY2010. BZ expects to achieve annual synergies of about $8 million over the next 18 months. Strategically, in our view, the acquisition, increases BZ's vertical integration in containerboard from 70% to approximately 85% or by 150,000 tons, further diversifies BZ's end-market exposure to the growing paper packaging grades and away from the declining printing/writing grades, provides opportunity for earnings growth. Goldman Sachs has a Neutral rating on BZ BZ closed Tuesday at $9.16