Sonoco has entered a definitive agreement to purchase the remaining equity interest in RTS Packaging from joint venture partner WestRock, and one WestRock paper mill in Chattanooga, TN, for $330m in cash. The valuation is approximately 6.6x adjusted EBITDA without synergies and 5x adjusted EBITDA pro forma for synergies.
Sonoco also anticipates that it will be able to achieve $40m of tax benefits from the transaction. Upon completion of the transaction, Sonoco will own 100% of RTS, formerly operated as a joint venture between Sonoco (35% ownership) and WestRock (65% ownership). The transaction which has been approved by the Sonoco Board of Directors is expected to close in the first half of 2023, subject to regulatory approvals and customary closing conditions.
RTS Packaging was formed in 1997 as a joint venture that combined the former protective packaging operations of WestRock and Sonoco to market solid fiber partitions from 100% recycled paperboard to glass container manufacturers and producers of wine, liquor, food, and pharmaceuticals. For the year ending Dec. 31, 2022, the acquired assets are expected to generate sales of approximately $270m and EBITDA of $50m. In addition, the company expects to drive total synergies of $16m over the next 24 months following closing.
The transaction will give Sonoco full ownership of fourteen converting operations, including ten in the U.S., two in Mexico, and two in South America and one paper mill in the U.S.. Upon completion of the transaction, approximately 1,100 individuals will become employees of Sonoco.
