Competition Authority in Brazil Approves the Sale of Tredegar’s Terphane Business Unit to Oben Group; Transaction Expected to Close on November 1

Rhea-AI Summary

Tredegar (NYSE:TG) announced that Brazil's Administrative Council for Economic Defense (CADE) has approved the sale of its Terphane flexible packaging business to Oben Group. The transaction is expected to close on November 1, 2024, with certain post-closing commitments for Oben to address competition concerns.

The sale agreement, entered on September 1, 2023, involves a net cash-free and debt-free base consideration of $116 million. Tredegar anticipates after-tax net cash proceeds of $85 million, including $78 million at closing and $7 million from escrow funds release within 120 days. These figures are subject to change based on Terphane's final closing balance sheet.

Tredegar, an industrial manufacturer with three primary businesses, reported 2023 sales of $705 million and employs approximately 1,900 people globally. Oben Group is a significant player in the flexible packaging industry with over 32 years of experience and operations in more than 17 countries.

Positive

• CADE approval for the sale of Terphane to Oben Group
• Expected net cash-free and debt-free base consideration of $116 million
• Anticipated after-tax net cash proceeds of $85 million from the transaction
• Tredegar reported 2023 sales of $705 million

Negative

• Post-closing commitments required to address competition concerns
• Final proceeds subject to change based on closing balance sheet adjustments

Insights

Financial Analyst

The approval of the Terphane sale by Brazil's competition authority is a significant milestone for Tredegar The $116 million base consideration for the cash-free and debt-free transaction translates to expected after-tax net proceeds of $85 million. This deal represents a substantial cash infusion for Tredegar, potentially strengthening its balance sheet and providing capital for strategic initiatives or shareholder returns. The $78 million immediate cash at closing, followed by $7 million from escrow release, offers a phased liquidity boost. However, investors should note that the final proceeds are subject to adjustments based on the closing balance sheet. This divestiture aligns with Tredegar's portfolio optimization strategy, potentially allowing it to focus on its core aluminum extrusions and surface protection films businesses. The market's reaction will likely hinge on how Tredegar plans to utilize these proceeds and its growth strategy post-divestiture.

Legal Expert

The merger control agreement approved by CADE is important for the transaction's progression. The post-closing commitments required from Oben Group to address competition concerns are typical in such deals but warrant attention. These conditions could potentially impact Oben's integration plans and the flexible packaging market dynamics in Brazil. For Tredegar, the approval removes a significant regulatory hurdle, reducing transaction risk. The planned closing date of November 1, 2024, provides ample time for both parties to prepare for the transition. The structure of the deal, including the escrow arrangement and Post-Closing Review Period, offers some protection for both parties against potential discrepancies in the closing balance sheet. Investors should be aware that while major regulatory approval has been secured, the transaction remains subject to customary closing conditions and the fulfillment of the merger control agreement terms.

RICHMOND, Va.--(BUSINESS WIRE)-- Tredegar Corporation (NYSE:TG) announced today that Brazil’s Administrative Council for Economic Defense (“CADE”) approved a merger control agreement allowing Tredegar to proceed with the sale of Terphane, its flexible packaging business headquartered in Brazil, to Oben Group. The conditions contained in the merger control agreement, mainly comprised of post-closing commitments for Oben to address certain competition concerns, are expected to be met with closing of the transaction planned for November 1, 2024.

On September 1, 2023, Tredegar entered into an agreement to sell Terphane to Oben for net cash-free and debt-free base consideration of $116 million. Tredegar expects to realize after-tax net cash-free and debt-free cash proceeds from completion of the transaction of $85 million (after deducting projected Brazil withholding taxes, net working capital adjustments, escrow funds, US capital gains taxes and transaction expenses), including $78 million at closing and $7 million from the release of certain escrow funds within 120 days of closing (the “Post-Closing Review Period”). Expected amounts are based on Terphane’s estimated closing balance sheet, which are subject to change based on any revisions to estimates before closing and the actual closing balance sheet compiled during the Post-Closing Review Period.

Tredegar is an industrial manufacturer with three primary businesses: custom aluminum extrusions for the North American building & construction, automotive and specialty end-use markets; surface protection films for high technology applications in the global electronics industry; and specialized polyester films primarily for the Latin American flexible packaging market. Tredegar had 2023 sales of $705 million. With approximately 1,900 employees, Tredegar operates manufacturing facilities in North America, South America, and Asia.

Oben is an important player in the market of inputs for the flexible packaging industry with more than 32 years of experience in the production of state-of-the-art flexible films having strategic locations in more than 17 countries with sales to more than 40 countries in the Americas, Europe and Africa. It has a diversified portfolio that includes BOPP, BOPET, BOPE, BOPA, CPP, Extrusion Coated as well as Thermoformed Products.

Forward-Looking Statements

Some of the information contained in this press release may constitute “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When we use the words “believe,” “estimate,” “anticipate,” “appear to,” “expect,” “project,” “plan,” “likely,” “may” and similar expressions, Tredegar does so to identify forward-looking statements. Such statements are based on Tredegar’s then current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. It is possible that actual results may differ, possibly materially, from the forward-looking statements provided in this press release. Accordingly, you should not place undue reliance on these forward-looking statements. Factors that could cause actual results to differ from expectations include, without limitation, the following: Tredegar’s inability to complete the proposed transaction in a timely manner (or at all) and at the prices it has assumed; possible disruptions to customer and employee relationships and business operations caused by the proposed transaction; and the other factors discussed in the reports Tredegar files with or furnishes to the Securities and Exchange Commission (the “SEC”) from time to time, including the risks and important factors set forth in additional detail in “Risk Factors” in Part I, Item 1A of Tredegar’s Annual Report on Form 10-K for the year ended December 31, 2023. Readers are urged to review and consider carefully the disclosures Tredegar makes in its filings with the SEC.

Tredegar does not undertake, and expressly disclaims any duty, to update any forward-looking statement made in this press release to reflect any change in management’s expectations or any change in conditions, assumptions or circumstances on which such statements are based, except as required by applicable law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241016074230/en/

Neill Bellamy, 804-330-1211

neill.bellamy@tredegar.com

Source: Tredegar Corporation

FAQ

When is the Tredegar (TG) Terphane sale to Oben Group expected to close?

The transaction is expected to close on November 1, 2024, following approval from Brazil's Administrative Council for Economic Defense (CADE).

What is the sale price for Tredegar's (TG) Terphane business unit?

The net cash-free and debt-free base consideration for the sale of Terphane to Oben Group is $116 million.

How much after-tax cash proceeds does Tredegar (TG) expect from the Terphane sale?

Tredegar expects to realize after-tax net cash-free and debt-free cash proceeds of $85 million from the completion of the transaction.

What were Tredegar's (TG) sales in 2023?

Tredegar reported sales of $705 million for the year 2023.