Berry Global to spin off, merge the majority of HH&S segment with Glatfelter

Berry Global (BERY) and Glatfelter (GLT) announced they have entered into definitive agreements for Berry to spin-off and merge the majority of its Health, Hygiene and Specialties segment to include its Global Nonwovens and Films business, or HHNF, with Glatfelter, to create a publicly-traded company in the specialty materials industry. The boards of directors of Berry and Glatfelter have unanimously approved the transaction. In September, Berry announced a review of strategic alternatives for its Health, Hygiene & Specialties segment. This announcement is the culmination of a review of strategic alternatives to determine the value-maximizing path forward for Berry shareholders. The remaining HH&S businesses, including Berry’s tapes business, will be retained by Berry. Pro forma for the separation transaction, Berry generated approximately $10.2B of revenue and $1.8B in adjusted EBITDA for the last twelve months period end December 30, 2023. Furthermore, in conjunction with this announcement, Berry will change the name of its Engineered Materials segment to Flexibles to showcase the continued evolution of this segment towards high-value products and solutions. Together, HHNF and Glatfelter generated pro forma revenue of approximately $3.6B and Adjusted EBITDA of approximately $455M based on combined results for the last twelve months period ended December 2023 for Berry and the LTM period ended September 2023 for Glatfelter, along with expected cost synergies of $50M and combined pro forma adjustments of $25M to be realized by year three. The new, publicly-traded company, which will be renamed and rebranded by transaction close, will be led by Curt Begle, Berry’s current president of HH&S, who will serve as CEO. Additional members of the combined company’s senior management team will be announced at a later date. The board of directors of the combined company will initially be comprised of nine total members, consisting of six designated by Berry and three designated by Glatfelter. The chairman will be designated by Glatfelter, and all directors will be named at a future date. The transaction is being structured as a Reverse Morris Trust transaction and is intended to be tax-free to Berry, Glatfelter and their respective shareholders for U.S. federal income tax purposes. Berry shareholders will own 90% of the combined company’s common shares upon consummation of the transaction. Glatfelter shareholders will own the remaining 10% of the combined company. Berry is expected to receive net cash proceeds of approximately $1B at close and intends to use these proceeds to repay existing debt. Berry expects to maintain its existing capital allocation priorities following this transaction. Closing of the transaction is expected to occur in the second half of calendar 2024, subject to various customary closing conditions, including regulatory approvals and Glatfelter shareholder approval. No vote of Berry’s shareholders is required for the transaction. The transaction is expected to be leverage neutral to Berry. Additionally, prior to closing of the transaction, Glatfelter will complete a reverse stock split of all of its issued and outstanding common stock. The reverse stock split ratio will be determined by Glatfelter and Berry, closer to the closing date of the transaction, and additional information will be provided prior to the effective time of the reverse stock split.