Dive Brief:
- Sonoco has acquired the remaining stake in RTS Packaging from WestRock, as well as a WestRock paper mill in Chattanooga, Tennessee, for a purchase price of $330 million.
- According to Sonoco, the transaction adds 15 facilities and 1,100 employees across its operations in the U.S., Mexico, Chile and Argentina.
- RTS was formed as a joint venture between the two companies, with a focus on fiber partition packaging. Sonoco previously held a 35% stake in RTS.
Dive Insight:
RTS launched in 1997 to combine the protective packaging operations of RockTenn (which later merged with another company to become WestRock) and Sonoco, with a focus on selling “solid fiber partitions from 100% recycled paperboard to glass container manufacturers and producers of wine, liquor, food, and pharmaceuticals.”
According to the company’s website, it has since expanded to offer products for the agricultural, automotive and construction industries across 14 converting facilities. In addition to fiber partitions, RTS also sells a range of folding cartons, die cuts, pads and other related products. Sonoco previously estimated that RTS would generate sales of $270 million in 2022 and yield $16 million worth of synergies within a two-year period.
The announcement caps off an extended process for a deal that was first announced in November 2022 and went through multiple rounds of antitrust review from the U.S. Department of Justice. The companies initially expected the transaction to close in the first half of this year, but timing was extended this summer.
In a 2022 investor presentation, Sonoco described the transaction as a good fit because it expanded the company’s paper capacity in the Americas, had a focus on the consumer market and included “high quality converting operations.”
Sonoco’s existing protective packaging operations are included under its broader industrial paper packaging segment, which is the company’s second-largest sales category after consumer packaging. While industrial sales have been down for Sonoco in recent months, as part of a trend of lower demand at many packaging companies, executives said during their latest earnings call that demand for consumer protective packaging was up by 5% over 2022.
Looking ahead, Sonoco has previewed “a funnel of accretive acquisitions and plans for non-core divestitures over the next few years” but also described the current deal environment as challenging. Meanwhile, WestRock announced this week that it is in talks for a possible merger with Smurfit Kappa that would create a major global paper company.
