Greif Divests Containerboard Business For $1.8 Billion To Slash Debt

Greif Inc. GEF has entered into a definitive agreement to divest its Containerboard business to Packaging Corporation of America PKG for $1.8 billion in cash, in a deal expected to close by the end of fiscal 2025.

The transaction includes two containerboard mills with approximately 800,000 tons of annual production capacity and eight sheet feeder and corrugated plants across the United States.

This business generated $1.2 billion in revenue and $212 million in EBITDA for the twelve months ended April 30, 2025, valuing the transaction at 8.5x LTM EBITDA, or 6.6x including $60 million in anticipated synergies.

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These synergies, driven by production optimization, increased integration, and lower transportation costs, are expected to be fully realized within two years, with half achieved in year one.

The divestiture excludes Greif’s URB (Uncoated Recycled Board) network, which remains integral to its strategy of focusing on higher-margin packaging solutions.

Financially, the sale is expected to lower Greif’s pro forma leverage ratio to below 2.0x, generate annual interest savings of $85 million, and reduce annual maintenance capital expenditure by $25 million, the company said in a note to investors. The company also anticipates further deleveraging following the planned sale of its timberland assets.

The company intends to use the full proceeds to repay debt and reinvest in high-ROIC opportunities aligned with its “Build to Last” strategic vision. Greif has reaffirmed its 2027 financial targets, including $1 billion in Adjusted EBITDA and $500 million in Adjusted Free Cash Flow.

On the buyer side, PCA plans to finance the acquisition with $1.5 billion in new debt and cash on hand, resulting in a pro forma net debt-to-EBITDA ratio of 1.7x post-closing.

CEO Ole Rosgaard described the transaction as a “pivotal step” in the company’s “Build to Last” strategy, emphasizing the goal to unlock shareholder value, strengthen the balance sheet, and focus on core areas with leadership positions.

The deal underscores Greif’s commitment to streamlining operations, boosting margin expansion, and delivering long-term growth.

As of March 31, 2025, Packaging Corporation of America held $914.4 million in cash, cash equivalents, and marketable debt securities.

Related ETFs: iShares U.S. Industrials ETF IYJ, SPDR S&P 500 ETF Trust SPY.

Price Action: At the last check on Tuesday, GEF shares were trading higher by 3.21% at $67.10, and PKG was up 3.70% at $195.28.

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