Sonoco Announces Agreement for the Divestiture of its Protective Solutions Packaging Business as Part of Planned Portfolio Optimization Strategy

Rhea-AI Summary

Sonoco Products Company announced the sale of its Protective Solutions business to Black Diamond Capital Management, LLC for an estimated $80 million in cash. The transaction is expected to be completed in the first half of 2024, subject to customary closing conditions. The Protective Solutions business, with approximately 900 employees and net sales of approximately $170 million in 2023, is one of North America's premier manufacturers of molded expanded polypropylene and expanded polystyrene foam components and integrated material solutions serving various industrial end markets. Sonoco's President and CEO, Howard Coker, emphasized the company's strategic focus on divesting non-core assets and refocusing on core businesses to achieve greater scale, profitability, and market leadership.

Insights

Financial Analyst

The divestiture of Sonoco's Protective Solutions business for an estimated $80 million represents a strategic repositioning that could potentially streamline operations and focus capital on more profitable core areas. The sale price, when compared to the reported net sales of approximately $170 million in 2023, may raise questions about the valuation multiples applied and the potential impact on earnings. Stakeholders should consider the implications of this divestiture on Sonoco's balance sheet and future earnings potential. The influx of cash may provide Sonoco with the flexibility to invest in high-growth areas, reduce debt, or return capital to shareholders through dividends or share repurchases.

Market Research Analyst

From a market perspective, the sale of Sonoco's Protective Solutions business could signal a shift in the competitive landscape within the sustainable packaging industry. By divesting non-core assets, Sonoco may be aiming to consolidate its market position in its primary segments. It's important to analyze how this move aligns with industry trends towards specialization and whether it can effectively enhance Sonoco's market leadership. Additionally, the transfer of approximately 900 employees to a new owner could impact the labor dynamics and operational efficiency within the sector.

Legal Expert

The transaction's legal intricacies, involving advisors such as Raymond James and Jones Day, suggest a complex deal structure that adheres to regulatory and due diligence requirements. As the sale is subject to customary closing conditions, stakeholders should monitor for any regulatory hurdles that may arise. The involvement of reputable legal advisors also indicates that the agreement is designed to mitigate post-transaction legal risks for Sonoco, which could have implications for the long-term stability of the company's operations and financial health.

HARTSVLLE, S.C., Jan. 30, 2024 (GLOBE NEWSWIRE) -- Sonoco Products Company (“Sonoco” or the “Company”)(NYSE: SON), one of the largest global sustainable packaging companies, today announced that certain of its subsidiaries entered into a definitive agreement to sell its Protective Solutions business to Black Diamond Capital Management, LLC (“Black Diamond”) for an estimated $80 million in cash. The transaction is subject to customary closing conditions and is expected to be completed in the first half of 2024. This sale is the result of Sonoco’s continuing evaluation of its business portfolio and is consistent with its strategic and investment priorities.

Sonoco’s Protective Solutions business is one of North America’s premier manufacturers of molded expanded polypropylene and expanded polystyrene foam components and integrated material solutions serving the automotive, power sports, impact surfaces, HVAC, electronics/technology, appliances, and various other industrial end markets. The business operates nine manufacturing facilities and has approximately 900 employees. Net sales were approximately $170 million in 2023. Financial results for Protective Solutions are reported in Sonoco’s All Other Businesses reporting segment.

“We believe this divestiture builds on our previously articulated strategy to divest non-core assets and to refocus our efforts on core businesses to achieve greater scale, profitability, and market leadership,” said Howard Coker, President and CEO of Sonoco. “I personally would like to thank the entire Protective Solutions team for their years of delivering quality products and outstanding customer service on behalf of Sonoco. We know their knowledge, experience, and leadership will be greatly valued by their new owner and wish the entire team much continued success in the future.”

Raymond James is acting as the exclusive financial adviser and Jones Day is acting as legal advisor to Sonoco in connection with this transaction.

Greenberg Traurig, LLP is acting as the legal advisor to Black Diamond in connection with this transaction.

Contact Information:
Lisa Weeks
Vice President of Investor Relations & Communications
lisa.weeks@sonoco.com
843-383-7524

About Sonoco
Founded in 1899, Sonoco (NYSE:SON) is a global provider of packaging products. With net sales of approximately $7.3 billion in 2022, the Company has approximately 22,000 employees working in more than 320 operations around the world, serving some of the world’s best-known brands. With our corporate purpose of Better Packaging. Better Life., Sonoco is committed to creating sustainable products, and a better world, for our customers, employees and communities. The Company ranked first in the Packaging sector on Fortune’s World’s Most Admired Companies for 2022 and was also included in Barron’s 100 Most Sustainable Companies for the fourth consecutive year. For more information on the Company, visit our website at www.sonoco.com.

About Black Diamond
Black Diamond is a leading privately held alternative asset management firm with over $10 billion in assets under management across complimentary private equity, hedge fund and CLO/structured strategies. Black Diamond’s private equity platform focuses on partnering with middle market companies in market leadership positions, often within sectors characterized by material tangible assets. Black Diamond has significant experience executing corporate carve out transactions from public and private companies including acquisitions of businesses from EBSCO Industries, Hexion Inc, Georgia Pacific and Arcosa Inc, among others. Founded in 1995, Black Diamond is headquartered in Stamford, CT. 

FAQ

What business is Sonoco selling?

Sonoco is selling its Protective Solutions business.

Who is Sonoco selling its Protective Solutions business to?

Sonoco is selling its Protective Solutions business to Black Diamond Capital Management, LLC.

How much is the estimated value of the sale?

The estimated value of the sale is $80 million in cash.

When is the transaction expected to be completed?

The transaction is expected to be completed in the first half of 2024, subject to customary closing conditions.

What are the net sales of Sonoco's Protective Solutions business in 2023?

The net sales of Sonoco's Protective Solutions business in 2023 were approximately $170 million.