Silgan to acquire Graham Packaging

Silgan Holdings Inc. announced it has entered into a definitive merger agreement to acquire Graham Packaging Company Inc.

Pursuant to the merger agreement, Graham shareholders will receive 0.402 shares of Silgan common stock and $4.75 in cash for each share of Graham common stock, representing a total enterprise value, including net debt, of approximately $4.1 billion. Based on Silgan's closing stock price on April 12, 2011, the transaction implies a value of $19.56 per Graham share, representing a premium over the closing price of Graham's stock on April 12, 2011 of approximately 17 percent.

"This acquisition creates the premier Food and Specialty Beverage packaging company, allowing Silgan to significantly broaden its ability to serve these important markets with multiple rigid packaging options," said Tony Allott, Silgan's President and Chief Executive Officer. "Graham Packaging is a differentiated plastic packaging franchise with deep customer relationships and a strong track record for innovation. In combination, we anticipate building enhanced relationships with global customers in our target end markets," continued Mr. Allott.

"Silgan and Graham share a common operational discipline focused on returns on capital and cash flow generation. This acquisition will provide significant cost synergies, while efficiently utilizing the debt capacity of our balance sheet," continued Mr. Allott. "As a result, we believe this combination will drive significant shareholder value creation," concluded Mr. Allott.

The combined company has annual sales of over $6.2 billion, and its over 17,000 employees will operate 180 manufacturing facilities in 19 countries.

As a result of its strong reputation in the credit markets and anticipated ratings profile, Silgan expects to achieve a very attractive cost of debt capital, resulting in pro forma interest expense in line with current Silgan and Graham combined levels, even after the incremental debt raised for the cash portion of the acquisition consideration and transaction costs. Included in these transaction costs is a cash payment at closing of $245 million pursuant to contractual change in control provisions in Graham's Income Tax Receivable agreements with certain affiliates. It is expected that the net present value of cash tax savings Silgan will realize through the utilization of Graham's net operating loss carryforwards and other tax attributes will more than offset this payment.

This transaction has been unanimously approved by Silgan's Board of Directors. The transaction has also been unanimously approved by Graham's Board of Directors based on the unanimous recommendation of its Special Committee. The acquisition is currently expected to close in the third quarter of 2011, subject to the approval of the transaction by Silgan's shareholders and Graham's shareholders, receipt of applicable regulatory approvals and the satisfaction of customary closing conditions. Each of Silgan's Co-Chairmen of the Board, R. Philip Silver and D. Greg Horrigan, who collectively beneficially own 29% of Silgan's common stock, have entered into an agreement to vote in favor of the transaction. Blackstone Capital Partners III L.P. and certain of its affiliates and the Graham Family, who collectively own, on a fully diluted basis, 65% of Graham's common shares, have also entered into agreements to vote in favor of the transaction.

BofA Merrill Lynch acted as financial advisor to Silgan. Bryan Cave LLP served as Silgan's legal advisor.