Transcontinental to use term loans, cash in $1.32 billion acquisition

By Devika Patel

Knoxville, Tenn., April 3 – Transcontinental Inc. plans to use term loans provided by CIBC and Scotia Capital (USA) Inc. along with cash on hand to acquire Coveris Americas from Coveris Holdings SA for $1.32 billion or approximately C$1.72 billion.

The company’s leverage ratio will be 2.7x at closing but will fall to 2x after two years.

Transcontinental expects strong free cash flow to help pay down the debt and intends to maintain its investment-grade credit rating.

“Our pro forma net debt to adjusted EBITDA ratio is expected to be 2.7x at closing and we expect our leverage to reduce to below 2x within the next 24 months,” chief financial officer Nelson Gentiletti said on the company’s fourth quarter and year ended Dec. 31, 2017 earnings conference call on Tuesday.

“We will continue to manage our balance sheet prudently and we expect to generate strong cash flow that will help us deleverage rapidly.

“We remain committed to maintaining our current investment-grade rating,” Gentiletti said.

This acquisition is significant for the company and one of the biggest it has carried out.

“[This acquisition] is one of the biggest, if not the biggest transaction of our history,” president and chief executive officer François Olivier said on the call.

The acquisition is expected to be completed in the third quarter of Transcontinental's fiscal year 2018.

The publishing, media and marketing company is based in Montreal. Coveris Americas is a Chicago-based manufacturer of flexible plastic and paper products.

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