Transcontinental Inc, a Canada-based printer and supplier of flexible packaging in North America, has agreed to acquire Coveris Americas, a converter of flexible packaging and other value-added products in North America.

The purchase price is US$1.32 billion, subject to customary closing adjustments. Coveris Americas is a business held by Coveris Holdings S.A., a portfolio company of Sun Capital Partners, Inc. Headquartered in Chicago, Illinois, Coveris Americas manufactures a variety of flexible plastic and paper products, including rollstock, bags and pouches, coextruded films, shrink films, coated substrates and labels.

As of December 31, 2017, Coveris Americas operated 21 production facilities worldwide, namely in the Americas, the United Kingdom and Australasia. Coveris Americas has over 3,100 employees, the majority of whom are located in the Americas. For its fiscal year ended December 31, 2017, Coveris Americas generated US$966 million in revenues and US$128 million in Adjusted EBITDA.

Transcontinental's recent growth into the US market

The acquisition is Transcontinental's second acquisition of a US company in 2018. In March, the company announced its acquisition of Multifilm Packaging Corporation.

Complementing its printing and media operations, the acquisition of Coveris Americas significantly diversifies TC Transcontinental’s business into flexible packaging. Based on Coveris Americas’ financial results for its fiscal year ended December 31, 2017 and on TC Transcontinental's financial results for its fiscal year ended October 29, 2017, the pro forma consolidated revenues for the combined entity for fiscal 2017 are estimated at C$3.3 billion and C$564 million, respectively, with flexible packaging accounting for approximately 48 percent of total revenues.

The boards of directors of both TC Transcontinental and Coveris Americas have approved the terms of the acquisition. The acquisition, which remains subject to certain customary closing conditions and receipt of applicable antitrust approvals, is expected to be completed in the third quarter of TC Transcontinental's fiscal year 2018.

Benefits of the acquisition

The acquisition positions TC Transcontinental among the major flexible packaging converters in North America. It also positions TC Transcontinental across a broad range of flexible packaging's growing end markets, such as dairy, pet food, beverage, agriculture and consumer products.

Additionally, Coveris Americas brings a portfolio of approximately 3,500 customers, providing an integrated flexible packaging platform leading to potential economies of scale. The acquisition will add a footprint of 21 production facilities in the US, Canada, Ecuador, Guatemala, Mexico, the United Kingdom, New Zealand and China to TC Transcontinental's 7 existing flexible packaging facilities.

"Today’s announcement marks a turning point in TC Transcontinental’s 42-year history," said Isabelle Marcoux, chair of the board of Transcontinental Inc., in a press release. "This transaction crystallizes our strategic shift toward flexible packaging and solidifies our commitment to profitable growth. We are convinced that this transformational acquisition will be a driver in the creation of long-term value for all of our stakeholders. It is with pride that we begin the next chapter of our successful journey with Coveris Americas, its employees and customers, building on our values of respect, teamwork, performance and innovation."

Legal advice is being provided to TC Transcontinental with respect to US law, by Morgan, Lewis & Bockius LLP, and, with respect to Canadian law, by Stikeman Elliott LLP.