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Greif to buy Caraustar from H.I.G. Capital affiliate in $1.8B deal

Greif Inc. agreed to buy Caraustar Industries Inc. from an affiliate of private equity firm H.I.G. Capital LLC in a cash deal worth $1.8 billion.

Austell, Ga.-based Caraustar is a provider of uncoated and coated recycled paperboard and packaging solutions with more than 80 operating facilities across the U.S. It generated sales of $1.4 billion and EBITDA of $174 million for the 12 months ended Sept. 30. Its run-rate EBITDA is $220 million, based on trailing 12-month actual volume and adjusted for current market conditions as of Sept. 30.

The Caraustar acquisition is expected to be immediately accretive to Greif's margins, earnings per share and free cash flow per share before synergies. The transaction would increase Greif's U.S. sales to about 66% of total consolidated sales from approximately 50% and boost Greif's paper packaging sales to approximately 50% of total consolidated revenues from 23% for fiscal 2018, among other benefits.

Greif expects the transaction to generate annual run-rate cost synergies of at least $45 million within 36 months of the deal's closing, scheduled for the first quarter of 2019. Greif's projected leverage ratio at closing will be about 3.5x.

H.I.G. Capital acquired Caraustar from Wayzata Investment Partners LLC in 2013, according to S&P Global Market Intelligence data.

Wells Fargo Bank NA, Goldman Sachs Bank USA and JP Morgan Chase Bank NA committed to provide financing for the transaction, providing additional term loans and bridge financing to a planned senior unsecured notes issuance.

Goldman Sachs & Co. LLC was exclusive financial adviser to Greif on the deal, with Allen and Overy LLP, Vorys Sater Seymour and Pease LLP and Ice Miller LLP serving as legal advisers to Greif. Rothschild & Co. and Credit Suisse were financial advisers to Caraustar, while Ropes & Gray LLC was its legal adviser.