Sonoco Products Company (NYSE:SON) shares are trading lower after the company inked an agreement to buy Eviosys for around EUR3.615 billion ($3.9 billion) on a cash-free, debt-free basis.

Eviosys manufactures metal packaging, including food cans, ends, aerosol cans, metal closures, and promotional packaging, with the largest footprint in metal food can production across 44 facilities in 17 countries and employing about 6,300 people.

The transaction is expected to support Sonoco's strategy to focus and expand its core operations while seizing profitable opportunities through organic growth and strategic acquisitions.

Sonoco plans to maintain its investment-grade credit rating by financing the transaction with new debt and up to $500 million from equity issuance, including a $200 million investment from KPS.

The proceeds from divestitures and operational cash flow will help Sonoco reduce net leverage to below 3.0x within 24 months.

The Boards of Directors of both companies have unanimously approved the transaction, which is expected to close by the end of 2024, pending regulatory approvals.

Post-deal closure, the company is projected to be a prominent player globally in manufacturing metal food cans and aerosol packaging.

Synergies: Sonoco expects to achieve over $100 million in synergies from integrating Eviosys with its metal can business.

Sonoco projects Eviosys to achieve around $2.5 billion in revenue and approximately $430 million in adjusted EBITDA for 2024, highlighting significant commercial and operational momentum with a nearly 50% increase in EBITDA since 2021.

Sonoco expects the transaction to immediately increase adjusted EPS and project over a 25% increase for 2025.

Eviosys generates strong operating cash flow, and post-acquisition, Sonoco anticipates a nearly 40% growth in EBITDA minus capital expenditures by 2025.

The acquisition is expected to deliver a return on invested capital exceeding Sonoco's cost of capital from year one.

By merging Eviosys's dominant presence in EMEA with Sonoco's established footprint in the U.S., Sonoco expands its global market potential in metal packaging to approximately $25 billion.

Howard Coker, President and Chief Executive Officer of Sonoco said, "The acquisition of Eviosys establishes our global leadership in metal food can and aerosol packaging, marking an exciting milestone in our strategy to scale our core strategic metal packaging platform and position Sonoco for long-term value creation."

Also, Sonoco plans to divest ThermoSafe, its top temperature-assured packaging business, along with other assets, aiming to generate at least $1 billion in proceeds over the next twelve to eighteen months.

As of March 31, 2024, Sonoco's cash and cash equivalents were $172 million.

Investors can gain exposure to the stock via Roundhill ETF Trust Roundhill S&P Dividend Monarchs ETF (NYSE:KNGS) and ProShares S&P MidCap 400 Dividend Aristocrats ETF (BATS:REGL).

Price Action: SON shares are down 1.108% at $54.99 premarket at the last check Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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