LAKE FOREST, Ill. - Pactiv Evergreen Inc. (NASDAQ: PTVE), a North American leader in fresh foodservice and beverage carton manufacturing, has entered into a definitive agreement to divest two of its facilities to global pulp producer Suzano S.A. The $110 million cash transaction includes the Pine Bluff paper mill in Arkansas and the Waynesville extrusion facility in North Carolina.
The sale, which is expected to close in the fourth quarter of 2024, is subject to customary closing conditions and foreign antitrust approval. The Pine Bluff site is known for producing liquid packaging board and cupstock for various fiber-based food and beverage packaging. The Waynesville facility adds extrusion capacity for the board produced at Pine Bluff.
As part of the deal, Suzano has committed to offer employment to the current workforce at both locations. Additionally, a long-term supply arrangement will be established, whereby Suzano will continue to supply liquid packaging board to Pactiv Evergreen's converting business.
"This Transaction is consistent with our disciplined focus on value creation, and we expect it to reduce the capital intensity of our business, improve our cash flow profile and further strengthen our balance sheet," stated Michael King, President and CEO of Pactiv Evergreen.
The company anticipates recording a non-cash impairment charge of approximately $320 million to $340 million in the third quarter of 2024 due to the estimated cash proceeds from the sale. Updated guidance for fiscal year 2024, reflecting the changes from this agreement, is expected to be provided with the company's second-quarter earnings.
UBS Investment Bank acted as financial advisor, and Debevoise & Plimpton LLP served as legal advisor to Pactiv Evergreen in the transaction.
Investors are reminded that forward-looking statements in this press release, such as the anticipated benefits of the transaction and the expected timing of its completion, are based on current expectations and carry risks and uncertainties that may result in materially different outcomes.
This news article is based on a press release statement from Pactiv Evergreen Inc.
In other recent news, Pactiv Evergreen has been making strategic financial decisions and demonstrating resilience amid economic challenges. The company successfully completed a financial maneuver, reducing its interest rate margin and extending its debt maturity. The repricing and upsizing of its senior secured Term Loan B led to a reduction in annual cash interest expense by an estimated $14 million.
RBC Capital and BofA Securities adjusted their financial outlooks for Pactiv Evergreen, with RBC Capital reducing the price target to $17.00 and BofA Securities to $16. Both firms maintained their positive ratings on the stock, despite acknowledging the adverse effects of inflation and lower consumer spending.
Pactiv Evergreen's first-quarter financial results for 2024 showed an adjusted EBITDA of $168 million, a decrease of 11% from the previous year, and net revenues of $1.3 billion, a 13% decrease due to a mill closure and lower sales volume. Despite these challenges, the company expects improvements in the second half of the year, driven by cost-saving actions and volume growth. These are recent developments in the company's financial landscape.
InvestingPro Insights
In the context of Pactiv Evergreen Inc.'s (NASDAQ: PTVE) recent strategic divestiture, investors can glean additional insights from InvestingPro metrics and tips. With a market capitalization of $2.14 billion, the company's valuation reflects a complex picture. While the P/E ratio stands at a negative -25.31, indicating that the company has been unprofitable in the last twelve months, an adjusted forward P/E ratio of 10.42 suggests expectations of profitability in the near future. This aligns with one of the InvestingPro Tips, which predicts that PTVE's net income is expected to grow this year.
Another key metric to consider is the company's revenue. The last twelve months as of Q1 2024 show a revenue of $5.331 billion, though this represents a decline of 13.4% from the previous period. Despite this, the InvestingPro Tips highlight PTVE's strong free cash flow yield, which may be an attractive point for value investors. Additionally, the dividend yield stands at a healthy 3.41%, a figure that income-focused investors might find appealing, especially considering the company's commitment to a long-term supply arrangement post-sale.
For those interested in further analysis and tips, InvestingPro offers additional insights on PTVE, including the company's liquid assets position relative to short-term obligations and the high return over the last year. Subscribers can use the promo code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are six more InvestingPro Tips available for PTVE, which could provide investors with a deeper understanding of the company's financial health and future prospects.
Investors considering Pactiv Evergreen Inc. as part of their portfolio should weigh these factors alongside the company's strategic moves, such as the recent divestiture, to make informed decisions.
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