Update on the Brazilian Merger Review Process for the Sale of Terphane to Oben Group

Rhea-AI Summary

Tredegar (NYSE: TG) announced an update on the sale of its flexible packaging films business, Terphane, to Oben Group. The Brazilian General Superintendence of the Administrative Council for Economic Defense (SG-CADE) issued a non-binding opinion recommending rejection of the transaction. However, this opinion isn't final; the case now moves to the CADE Tribunal for independent analysis. Tredegar CEO John Steitz expressed confidence in a positive outcome, emphasizing the cooperative approach with Brazilian authorities. The final decision is expected by November 18, 2024. Tredegar had 2023 sales of $705 million and operates globally with around 1,900 employees.

Positive

• Tredegar entered into a definitive agreement to sell Terphane to Oben Group.
• Tredegar had 2023 sales of $705 million.
• The sale has the potential to positively impact the flexible packaging films market in Brazil.
• Oben Group has a diversified portfolio and strategic locations in over 17 countries.

Negative

• SG-CADE issued a non-binding opinion recommending rejection of the Terphane sale.
• The case must now undergo a second stage review by the CADE Tribunal, which could delay the transaction.
• Final decision on the sale won't be rendered until November 18, 2024 at the latest, prolonging uncertainty.
• Rejection by CADE could negatively impact Tredegar’s financial outlook and market position.

Insights

Legal Expert

The recommendation by SG-CADE to reject the merger between Tredegar Corporation and Oben Group within the Brazilian review process does not necessarily spell the end of the transaction. The SG Opinion is non-binding, meaning that it is not the final word on the matter. The issue will now move to the CADE Tribunal, which will conduct its independent analysis and where both parties have the opportunity to present further evidence. Investors should note that competition authority opinions, while influential, are not conclusive until the Tribunal renders its decision, which could take up to November 18, 2024. This timeline allows the involved parties to address any competitive concerns raised and to potentially modify the terms of the deal to secure approval. The delay could affect short-term investor sentiment, but the final outcome remains open. It is also essential to consider the implications of any potential divestitures or conditions that may be imposed to gain approval if the Tribunal eventually clears the deal.

Market Research Analyst

From a market perspective, the acquisition of Terphane by Oben Group would lead to a significant consolidation in the flexible packaging films industry. Tredegar’s confidence in the positive development of this sale suggests anticipated synergies and market strengthening. However, the Brazilian authority’s initial reluctance highlights potential concerns about market monopoly or reduced competition, which could be detrimental to smaller market players and consumers. The competitive dynamics within Brazil’s flexible packaging films sector will be important in the Tribunal’s final decision. Investors should keep an eye on how both Tredegar and Oben articulate their market positions and any strategic concessions they might offer to allay competitive fears. The outcome could reshape the market landscape either by reinforcing a dominant player or by maintaining the status quo, which impacts long-term investment considerations.

RICHMOND, Va.--(BUSINESS WIRE)-- As previously announced, on September 1, 2023, Tredegar Corporation (NYSE: TG) entered into a definitive agreement to sell its flexible packaging films (“Terphane”) business to Oben Group. Completion of the sale is contingent upon the satisfaction of customary closing conditions, including the receipt of certain competition filing approvals by authorities in Brazil.

Tredegar announced today that, as part of the Brazilian merger review process regarding the sale of Terphane to Oben Group, the General Superintendence of the Administrative Council for Economic Defense (“SG-CADE”) issued a non-binding opinion (“SG Opinion”) recommending the rejection of the transaction. Following this first stage of the two-stage Brazilian merger review process for complex transactions, the case will now be submitted to the CADE Tribunal, in accordance with the customary Brazilian merger review process. Once the case is submitted to the Tribunal, the parties are given a full opportunity to present evidence in favor of clearing the transaction. The SG Opinion is not binding and the final decision regarding the transaction will eventually be rendered by the Tribunal, which will begin its independent analysis now.

John Steitz, Tredegar’s president and chief executive officer, said, “We remain confident that the sale of Terphane to Oben Group will be a positive development for the flexible packaging films market in Brazil. Tredegar has been fully cooperative with SG-CADE and will continue to cooperate with the CADE Tribunal to address any concerns. During the Tribunal’s review, Tredegar and Oben will detail their views on the market, its dynamics and the positive effects that would result from the transaction.”

CADE’s maximum deadline for completing its review, analysis and delivering its final decision regarding the transaction remains no later than November 18, 2024.

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 31 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, BOPA, BOPE, 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 Tredegar uses 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 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 carefully consider 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/20240516162401/en/

Tredegar Corporation

Neill Bellamy, 804-330-1211

neill.bellamy@tredegar.com

Source: Tredegar Corporation

FAQ

What is the current status of the sale of Terphane?

The sale of Terphane to Oben Group is under review. SG-CADE issued a non-binding opinion recommending rejection, and the case is now with the CADE Tribunal for further analysis.

What is the deadline for CADE’s final decision regarding the Terphane sale?

CADE's maximum deadline for completing its review and delivering a final decision is November 18, 2024.

What was Tredegar’s revenue in 2023?

Tredegar reported sales of $705 million in 2023.

What are the next steps in the Brazilian merger review process for Terphane’s sale?

The case will be submitted to the CADE Tribunal, where Tredegar and Oben Group can present evidence in favor of the transaction. The Tribunal will then make an independent decision.

Why did SG-CADE recommend rejection of the Terphane sale?

SG-CADE issued a non-binding opinion recommending rejection, but the specific reasons have not been detailed publicly. The final decision will be made by the CADE Tribunal.