Berry and Glatfelter: Upsized Notes Offering and Merger Implications

Berry Global Group, Inc. (NYSE: BERY) and Glatfelter Corporation (NYSE: GLT) recently announced the pricing of an upsized senior secured notes offering by a Berry subsidiary, Treasure Escrow Corporation. This offering is connected to the proposed merger of Berry's Health, Hygiene and Specialties Global Nonwovens and Films business with Glatfelter. The offering was increased to $800 million, reflecting a $300 million increase from the previously announced offering size of $500 million.

The Notes will bear interest at a rate of 7.250% payable semiannually, in cash in arrears, on April 15 and October 15 of each year, commencing on April 15, 2025, and will mature on November 15, 2031. The closing of the offering is expected to be completed on or about October 25, 2024, subject to customary closing conditions.

The proceeds from the offering, along with the proceeds from a term loan financing in connection with the Transaction, will be used to fund the cash distribution to BGI in connection with the Transaction, to repay certain existing indebtedness of Glatfelter, and to pay certain fees and expenses. All proceeds of the offering will be deposited into a segregated escrow account until certain escrow release conditions are satisfied substantially concurrently with the consummation of the Transaction.

The increased debt from the notes offering may impact Berry's and Glatfelter's respective credit ratings and borrowing costs. However, the specifics of this impact will depend on various factors, including the combined company's financial performance and overall debt levels.

The expected impact of the merger on the combined company's earnings per share and revenue growth will be influenced by the synergies realized from the integration of Berry's and Glatfelter's operations. Potential cost savings and revenue enhancements may arise from streamlined operations, improved efficiency, and expanded market reach.

The successful integration of the two companies will be crucial for the merger's success. Potential risks and challenges may include operational inefficiencies, cultural differences, and market disruptions. Effective management and strategic planning will be essential to mitigate these risks and ensure a smooth integration process.

The interest rate of the senior secured notes will affect the merged company's debt service costs and profitability. A higher interest rate will increase debt service costs, potentially impacting the company's earnings and cash flow. However, the interest rate is competitive with other financing options available to the merged company, and the specific implications for its capital structure will depend on the company's overall financial situation.

In conclusion, the upsized notes offering by Berry's subsidiary and the proposed merger with Glatfelter present significant opportunities for the combined company. The successful integration of the two companies and the realization of synergies will be crucial for the merger's success. The interest rate of the senior secured notes will impact the merged company's debt service costs and profitability, but the specifics of this impact will depend on the company's overall financial situation.