HARTSVILLE, S.C. - Sonoco Products Company (NYSE: NYSE:SON), a global packaging firm rated "GREAT" for financial health by InvestingPro, has agreed to divest its Thermoformed and Flexibles Packaging (NYSE:PKG) (TFP) business to TOPPAN Holdings Inc. for $1.8 billion. The company, known for its 42-year streak of consecutive dividend increases, expects the deal to close in the first half of 2025 as part of its strategy to simplify its portfolio and focus on its core industrial paper and consumer packaging segments.[Get access to 7 more exclusive InvestingPro Tips for Sonoco and unlock comprehensive analysis for 1,400+ stocks with InvestingPro]
The transaction is contingent on regulatory approvals and other customary closing conditions. Sonoco plans to use the net proceeds from the sale to repay existing debt. Howard Coker, Sonoco's President and CEO, stated that the decision aligns with the company's efforts to streamline operations and concentrate capital investments on its remaining businesses. Coker expressed pride in TFP's history and commitment to quality and innovation, and a smooth transition for employees, customers, and suppliers is a priority.
Goldman Sachs & Co. LLC and RBC Capital Markets, LLC are serving as financial advisors to Sonoco, with Freshfields LLP as legal counsel. Toppan has appointed Houlihan Lokey (NYSE:HLI) and Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities Co., Ltd. as financial advisors, with Morrison & Foerster LLP as legal counsel.
Sonoco, with net sales of approximately $6.8 billion in 2023 and a current market capitalization of $4.8 billion, employs around 22,000 people globally and caters to well-known brands. The company maintains strong financial metrics with a healthy current ratio of 2.36 and generates solid returns with a 12% return on equity. According to InvestingPro's Fair Value analysis, the stock currently appears undervalued. The company emphasizes sustainable packaging solutions and was recognized by Newsweek as one of America's Most Responsible Companies.[Access detailed Fair Value analysis and comprehensive financial metrics with your InvestingPro subscription. Discover what Wall Street insiders know about Sonoco through our exclusive Pro Research Report.]
The announcement includes forward-looking statements, which involve risks and uncertainties. These include potential delays or changes in the timing or terms of the transaction, obtaining regulatory approvals, realizing anticipated benefits, and the impact on employee and client relationships. Sonoco has made it clear that actual results could vary from expectations.
This news is based on a press release statement from Sonoco Products Company.
In other recent news, Sonoco Products reported mixed Q3 2024 results, with sales reaching $1.68 billion and adjusted earnings per share of $1.49. Operational challenges from hurricanes and volume shortfalls in the rigid paper can segment were offset by substantial productivity savings. The company also confirmed the closure of the Eviosys acquisition in Q4 2024, which is expected to enhance earnings. Sonoco reaffirmed its full-year adjusted EPS guidance at $5.05 to $5.25, with Q4 2024 adjusted EPS projected between $1.15 and $1.35.
Truist Securities initiated coverage on Sonoco Products with a Buy rating and a price target of $63.00, highlighting the company's potential for multiple expansion. On the other hand, Baird adjusted its outlook on Sonoco Products, reducing its price target to $55 from the previous $58 while maintaining a Neutral rating due to the company's ongoing efforts to restructure its portfolio.
Sonoco Products is implementing strategic divestitures and focusing investments on three core businesses. The company anticipates an adjusted EBITDA of $1.5 billion and cumulative operating cash flow of $4 billion to $5 billion over the next five years. Management expects low single-digit growth for consumer products and flat results for industrials in 2025. These are among the recent developments in the company's operations.
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