USA – Sustainable packaging provider Sonoco has acquired the remaining stake in RTS Packaging from WestRock, as well as a WestRock paper mill in Chattanooga, Tennessee, for a purchase price of US$330 million.
The two parties originally entered into an agreement for the deal in November last year.
Sonoco expects the acquisition to further strengthen and expand its 100% recycled fiber-based packaging solutions to cater the rising consumer demand in wine, spirits, food, beauty and healthcare markets.
The company, which registered approximately US$7.3 billion in sales in 2022, owned 35% in RTS Packaging prior to the acquisition.
The firm adds a network of 15 operations and 1,100 employees in the US, Mexico, and South America.
The deal is expected to be immediately accretive to earnings per share, excluding the impact of purchase accounting adjustments.
Sonoco funded the deal with cash on hand and borrowings under its existing credit facilities.
At the time of announcing the agreement, Sonoco CEO and president Howard Coker said: “We are excited to acquire the remaining stake in RTS Packaging and look forward to working with Al Bosma, who will remain as the RTS leader, and the entire management team to continue to strengthen and grow the business.
“The acquisition is well-aligned with Sonoco’s long-term strategy to focus on our core integrated businesses and expand our sustainable consumer packaging portfolio. RTS has exposure to growing beverage markets, as well as unique capabilities to support marquee customers in these markets.”
RTS was launched in 1997 to combine the protective packaging operations of RockTenn (which later merged with another company to become WestRock) and Sonoco, with a focus on selling “solid fiber partitions from 100% recycled paperboard to glass container manufacturers and producers of wine, liquor, food, and pharmaceuticals.”
According to the company’s website, it has since expanded to offer products for the agricultural, automotive and construction industries across 14 converting facilities.
In addition to fiber partitions, RTS also sells a range of folding cartons, die cuts, pads and other related products.
Sonoco previously estimated that RTS would generate sales of US$270 million in 2022 and yield US$16 million worth of synergies within two years.
In a 2022 investor presentation, Sonoco described the transaction as a good fit because it expanded the company’s paper capacity in the Americas, had a focus on the consumer market and included “high-quality converting operations.”
Sonoco’s existing protective packaging operations are included under its broader industrial paper packaging segment, which is the company’s second-largest sales category after consumer packaging.
While industrial sales have been down for Sonoco in recent months, as part of a trend of lower demand at many packaging companies, executives said during their latest earnings call that demand for consumer protective packaging was up by 5% over 2022.
Looking ahead, Sonoco has previewed “a funnel of accretive acquisitions and plans for non-core divestitures over the next few years” but also described the current deal environment as challenging.
Meanwhile, WestRock announced this week that it is in talks for a possible merger with Smurfit Kappa that would create a major global paper company.
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