Jul 25 2008
Temple-Inland Inc. announced today that it has acquired the remaining fifty percent interest in Premier Boxboard Limited LLC (PBL) from Caraustar Industries, Inc.
PBL was a joint venture between Temple-Inland and Caraustar. The purchase price for Caraustar’s interest was $62 million in cash and assumption of $25 million of debt associated with the purchased interest.
PBL produces lightweight gypsum facing paper and containerboard at a 308,000 tons per year mill in Newport, Indiana. Temple-Inland will continue to produce lightweight gypsum facing paper and containerboard at the mill. The lightweight gypsum facing paper will serve the needs of both Temple-Inland’s building products operations and external customers. Containerboard produced at the mill will be primarily used by Temple-Inland’s corrugated packaging operations.
For the last three years, PBL’s average annual EBITDA was $23 million. PBL’s EBITDA for first quarter 2008 was $7 million. Caraustar has been the managing partner of PBL since its formation in 1999. Effective today, Temple-Inland terminated the marketing and management agreements by and between PBL and Caraustar. Marketing and management fees paid by PBL to Caraustar under these agreements have been approximately $4 million annually. Adjusting to eliminate these fees would add $4 million annually to PBL’s EBITDA.
In addition to eliminating the marketing and management fees paid to Caraustar, Temple-Inland expects to realize synergies of approximately $10 million from reducing cost, improving productivity and optimizing the mix of product as the mill is fully integrated into the Temple-Inland mill system.
Temple-Inland will fund the cash portion of the purchase price through borrowings under its existing credit facilities.
In announcing the transaction, Doyle R. Simons, chairman and chief executive officer of Temple-Inland said, “The acquisition of Caraustar’s interest in PBL is consistent with Temple-Inland’s key objectives of maximizing ROI and profitably growing our business.
“The Newport mill is a high-quality, well-invested facility that obtains its process steam pursuant to a long-term contract with an adjacent coal-fired power plant. We are confident in our ability to successfully integrate the mill into our system and improve its financial performance. This transaction will be immediately accretive to Temple-Inland’s earnings, returns and cash flow. We look forward to the PBL employees being a part of the Temple-Inland team.”
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Posted July 25th,2008