Sonoco purchases European food-can company Eviosys for $3.9 billion, mostly with debt
By Steve Gelsi
Packaging giant Sonoco is poised to become the leading maker of metal food cans globally - but it's taking on more debt to do so
Sonoco Products Co. said Monday it will use mostly debt to buy Eviosys, a Europe-based maker of food cans and closures, for $3.9 billion from private-equity firm KPS Capital Partners.
Sonoco (SON) said the transaction will make it the "leading metal food-can and aerosol-packaging manufacturer globally."
The company's stock fell 4% Monday.
Sonoco is targeting $100 million in cost savings from the deal over the next two years. Eviosys is expected to boost the packaging company's adjusted 2025 earnings by 25% and generate $2.5 billion in revenue this year.
Sonoco said it will finance the transaction mostly with new debt, as well as the issuance of $500 million in equity, including $200 million in equity to KPS.
Randal Kenworthy, senior partner at consulting firm West Monroe, said the high dollar amount of the deal, and especially the debt being assumed, will be worrying to some Sonoco investors.
"They may be over their ski tips a bit," Kenworthy said. "If they navigate the financing complexity ... it's a good, strategic, long-term play."
The plan to issue additional debt drew a reaction from Moody's Ratings, which placed Sonoco's Baa2 senior unsecured rating and P-2 backed commercial paper on review for downgrade. The previous outlook from Moody's was stable.
"The review for downgrade was prompted by the potential increase in Sonoco's financial leverage," Moody's analyst Mikhil Mahore said in a statement.
Sonoco said it plans to reduce its net leverage below 3.0x within 24 months by using cash from divestitures and operations.
The company also has $400 million in corporate bonds coming due in 2025.
The acquisition of Eviosys is projected to close by the end of the year. Morgan Stanley and J.P. Morgan Securities advised Sonoco. Rothschild & Co. was the sole financial adviser to KPS and Eviosys.
Sonoco is also planning to sell its ThermoSafe packaging business as part of a plan to raise $1 billion over the coming 12 to 18 months.
West Monroe's Kenworthy said the sale of ThermoSafe should generate healthy interest from other companies and private-equity firms.
Meanwhile, Sonoco competitor Packaging Corp. of America (PKG) saw its stock rise by 3.5% Monday as one of the leading gainers in the S&P 500 SPX, as investor interest in the space was piqued by the Eviosys deal.
The transaction comes three years after KPS created Eviosys in a carve-out acquisition from a unit of Crown Holdings Inc. (CCK)
Prior to Monday's trading, Sonoco's stock was down 0.5% in 2024, compared with a 14.6% gain by the S&P 500.
-Steve Gelsi
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06-24-24 1353ET
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