Investopedia: Silgan Packs Away Another Deal

Investors likely don't give much of a thought to packaging companies, unless it is to consider the ramifications of scare-stories like the presence of bisphenol A (BPA) in food cans. After all, this is just a commodity business with low growth potential, right?

Well, maybe not. It's absolutely true that packaging is not exciting from a growth perspective, but there is a lot to be said for an industry with customer-supplier relationships measured in decades of years, consistent margins and cash flow and consolidation potential. With that in mind, the deal between Silgan (Nasdaq:SLGN) and Graham Packaging (NYSE:GRM) becomes a little more interesting.

Terms of the Deal 

Silgan has long been an active acquirer, doing over 25 deals in the last 25 years, but Wednesday's deal for Graham is a whopper by past standards. Silgan is acquiring this plastic packaging specialist in a deal worth $4.1 billion based upon the pre-deal values of the respective stocks.

Silgan is paying considerations valued at $19.56 per share (again, based on Tuesday's closing prices), a 17% premium to Graham's prior close. Silgan is offering shareholders a mix of compensation - $4.75 in straight-up cash and 0.402 shares of Silgan stock. Because of that sizable chunk of stock, the real value of the deal is going to move around prior to the close of the deal. (For more, see Mergers And Acquisitions: Understanding Takeovers.)

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