Silgan Unveils $3.4B Trivium Deal, Setting Stage for Packaging Giant Spinoff

Key Points

• Silgan agreed to acquire Trivium Packaging for approximately $3.4 billion in cash, creating Silgan MCC, a metal-packaging business in which Silgan will retain a 60% stake while American Industrial Partners holds 40%.
• Silgan MCC is expected to generate about $7.3 billion in sales and $1.2 billion in adjusted EBITDA, including $225 million in anticipated synergies over three years. The combined operation would span more than 100 facilities and produce billions of cans and closures annually.
• The deal creates a potential path to a tax-free spinoff of Silgan MCC, while Silgan retains its dispensing and custom-containers businesses as a focused growth platform. Management expects the transaction to be at least 15% accretive to adjusted earnings per share and free cash flow.

Silgan NYSE: SLGN said it has agreed to acquire Trivium Packaging in an all-cash transaction valued at approximately $3.4 billion and plans to combine Trivium with its existing metal containers and food and beverage flat-cap closures operations.

The combined metal packaging business, to be called Silgan MCC, would be controlled by Silgan, which would retain a 60% common-equity interest. Funds affiliated with American Industrial Partners, or AIP, would contribute about $1 billion in cash for a 40% stake. Silgan said it expects to receive approximately $2.3 billion in cash proceeds at closing while continuing to consolidate Silgan MCC in its financial results.

President and CEO Adam Greenlee described the transaction as a “transformative step” in the company’s portfolio evolution. He said the structure is intended to strengthen Silgan’s metal packaging operations while providing more financial flexibility for its dispensing and custom containers businesses.

Scale, synergies and financial structure

Silgan said the combined company would have more than 100 manufacturing facilities and the capacity to produce more than 27 billion cans and over 30 billion closures annually. The transaction expands Silgan’s European presence and adds positions in aerosols and aluminum beverage bottles through Trivium, while combining those operations with Silgan’s North American food-can and global food and beverage closure businesses.

The company expects Silgan MCC to generate approximately $7.3 billion in sales and $1.2 billion in adjusted EBITDA, including $225 million of anticipated synergies. Management said the synergies are expected to consist of approximately 50% operations savings, 30% procurement savings and 20% selling, general and administrative savings.

Silgan expects to realize approximately $75 million of run-rate synergies in the first year, $150 million in the second year and $225 million in the third year. The company estimated one-time costs to achieve those savings at roughly $225 million, with about $100 million expected in each of the first two years and the remainder in the third year.

Chief Financial Officer Shawn Fabry said Trivium is being acquired at approximately 7.1 times last-12-month EBITDA, or 4.8 times including expected synergies. At closing, Silgan MCC is expected to have approximately $4.6 billion of net debt and net leverage of about 4 times, including the projected run-rate synergies. Fabry said the business is expected to incur approximately $4.9 billion of debt at closing, with an interest rate of roughly 7% based on prevailing forward curves.

Management characterized the overall transaction as leverage-neutral for Silgan on a consolidated basis. The company said its dispensing operation would have initial pro forma net leverage of about 1.8 times, while expected capital expenditures at Silgan MCC would be around 3% of sales.

Dispensing business to operate as focused growth platform

Silgan’s remaining wholly owned dispensing and custom containers businesses will be combined into a renamed Silgan Dispensing Solutions segment. The business currently generates approximately $2.5 billion in sales and $555 million of adjusted EBITDA, representing an adjusted EBITDA margin of about 22%, according to the company.

Greenlee said the revised structure would allow Silgan to continue pursuing organic investment and acquisitions in dispensing without changing its returns-based approach to capital allocation. He said the company’s acquisition pipeline for dispensing remains strong and that the transaction does not alter its expansion priorities for that business.

Silgan Dispensing Solutions employs more than 11,000 people and operates 66 manufacturing facilities, with approximately half of sales in North America, 34% in Europe and 16% elsewhere. Its products include fragrance and fine-mist dispensing systems, healthcare and drug-delivery products, trigger sprayers and plastic containers.

The company cited high-single-digit growth potential in healthcare and pharmaceutical markets, mid-single-digit potential in fragrance, beauty and personal care, and low-single-digit potential in home care and lawn and garden. Since 2017, Silgan said it has invested more than $4 billion in dispensing-related acquisitions and organic investments.

Path to a potential separation

Silgan said the transaction establishes a path for Silgan MCC to become an independent public company through a tax-free distribution. Management did not provide a specific timetable, saying timing would depend on integration progress, synergy realization, business readiness and market conditions.

During the call, Greenlee said the company’s immediate focus will be integrating the businesses and delivering first-year synergies. Once those savings are realized and there is a clear route to second-year synergies, Silgan could pursue an accelerated separation process.

On a pro forma basis, including the full expected synergies, Silgan said the combined portfolio would generate approximately $10 billion in sales and $1.7 billion in adjusted EBITDA. The company expects the transaction to be at least 15% accretive to adjusted earnings per share and free cash flow, including AIP’s minority interest and prevailing interest-rate assumptions.

About Silgan (NYSE:SLGN)

Silgan Holdings Inc NYSE: SLGN is a manufacturer of rigid packaging for consumer goods. The company produces metal containers, plastic containers, closures and dispensing systems used to package food, pet food, beverages, household products, personal-care items, chemicals, paints and other products.

Silgan's business is organized around metal containers, closures and dispensing systems. Its products include steel cans, plastic containers, caps, lids, pumps, sprayers and other dispensing components.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.