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Graphic Packaging Corporation and Altivity Packaging, LLC Announce Merger
Marietta, Georgia, and Chicago, Illinois, USA, 10 July 2007 -- /PRNewswire/ -- Graphic Packaging Corporation (NYSE: GPK) and the owners of Altivity Packaging, LLC announced today that they have signed a definitive agreement to combine the two companies.

The transaction is expected to be completed in the fourth quarter of 2007, subject to customary shareholder and regulatory approvals. The transaction has been approved by the boards of directors of both companies. Affiliates of TPG Capital, who control and own the majority of Altivity Packaging, have agreed to the transaction, and Graphic Packaging's three largest shareholders, who on a combined basis control more than 60% of Graphic Packaging's outstanding common stock, have agreed to vote in favor of the merger.

The merger is expected to create significant stockholder value by expediting growth opportunities, achieving significant cost savings and enhancing the credit profile of the newly-formed company through accelerated debt reduction.

Transaction Terms

Under the terms of the transaction, Graphic Packaging will merge into a newly-formed company, with each existing share of Graphic Packaging common stock being converted into a share of common stock in the new company. Affiliates of TPG Capital and the management owners of Altivity Packaging will contribute all of their equity interests in Altivity Packaging's holding company to the new company in exchange for shares of the new company's common stock.

Upon closing of the transaction, Graphic Packaging's current shareholders will initially own approximately 60% of the new company's common stock, while the shareholders of Altivity Packaging will initially own approximately 40%. Shares of the new company, to be named Graphic Packaging Holding Company, are expected to trade on the New York Stock Exchange under the trading symbol "GPK."

The transaction values Altivity Packaging at approximately USD 1.75 billion, based on Altivity Packaging's current net debt of USD 1.1 billion (as of 31 March 2007) and Graphic Packaging's 30-trading day average stock price of USD 4.92 per share (as of 05 July 2007).

In connection with the transaction, Graphic Packaging has obtained committed financing to refinance Altivity Packaging's existing indebtedness.

Defining Event

David W. Scheible, Graphic Packaging's president and chief executive officer, will serve as the president, chief executive officer, and member of the board of directors of the new company. George Bayly, Altivity Packaging's chairman and interim chief executive officer, will also join the new company's board of directors. The new company's board will be comprised of a majority of independent directors, and will be chaired by Graphic Packaging's current non-executive chairman, John R. Miller. The new company will be based in Marietta, Georgia, and will retain a significant presence in Chicago, Illinois, where Altivity Packaging is currently headquartered.

"Our two companies share similar operating philosophies, including an unwavering commitment to serving our customers with innovative products and solutions," said Scheible. "Our focus on continuous improvement will greatly enhance our integration activities, help us achieve our cost savings and merger synergy targets, and drive superior results. The new company will benefit from strong positions in multiple packaging sectors including paperboard, folding carton, multi-wall and specialty bags, flexible packaging, and labels, positioning us to provide our customers greater choice, better service, higher quality, and more innovative solutions for all of their packaging needs. Furthermore, this merger will expand the breadth and diversity of our combined customer bases, improve our service to key national accounts, and improve access to the regional and specialty customer segments," Scheible said.

"This merger brings together two companies that are highly respected leaders in the packaging industry," said Bayly. "Together, the new company will serve a more diversified customer base and achieve economies of scale and operating efficiencies that would be more difficult to achieve on a stand-alone basis. Under David's leadership, I am confident in our collective ability to achieve our original cost savings and growth objectives, to realize substantial merger synergies, and to better serve our customers and employees who represent the future of our new company."

High Quality of Assets

The merger of Graphic Packaging and Altivity Packaging brings together 86 high quality manufacturing and converting facilities and approximately 15,600 people on five continents, enabling the combined company to better serve customers and reduce costs. Graphic Packaging has 23 folding carton facilities, four mills, two packaging machinery manufacturing facilities, and one flexible packaging facility. Altivity Packaging has 24 folding carton facilities, 12 multi-wall and specialty bag facilities, six mills, five flexible packaging facilities, five ink facilities, three label facilities, and one packaging machinery equipment facility.

Financial Expectations

As a result of the transaction, the new company projects it will achieve annual gross merger synergies of more than USD 90 million expected to be fully realized by 2011, with approximately two-thirds realized by 2009. Although restructuring charges are anticipated to result from the integration, the new company is expected to generate cash flow from synergies in excess of the cash payments used for restructuring charges in each year. Such synergies are expected to be achieved through operating expense reductions, supply chain procurement changes, mill optimization efforts, and manufacturing process improvements.

Altivity Packaging management expects to achieve 2007 EBITDA in excess of USD 200 million excluding one-time costs to achieve cost savings and other one-time expenses of an estimated USD 35 million. Altivity Packaging management forecasts stand-alone cost reductions of approximately USD 50 million in 2007 and an additional USD 45 million in annual cost savings to be fully achieved by 2009. Altivity Packaging's stand-alone savings will result from manufacturing network optimization efforts, overhead reduction, and supply-chain improvements, and are separate from the gross merger synergies of more than USD 90 million expected to be derived from the combination of Graphic Packaging and Altivity Packaging.

Daniel J. Blount, senior vice president and chief financial officer of Graphic Packaging, stated, "We expect the combined companies to generate substantial cash flow to accelerate debt reduction, improve leverage ratios, finance ongoing investment, and fund growth initiatives. The transaction is anticipated to be accretive to earnings per share and free cash flow by 2008. Both companies have proven track records in merger integration, cost reduction and synergy attainment, and demonstrated ongoing productivity and quality programs. This transaction presents an attractive opportunity on all fronts."


Goldman, Sachs & Co. acted as financial adviser and Alston & Bird LLP acted as legal counsel to Graphic Packaging, and Banc of America Securities LLC acted as financial adviser and Simpson Thacher & Bartlett LLP acted as legal counsel to Altivity Packaging.

Conference Call

The company will host a conference call at 10:00 am (Eastern Time) on 10 July 2007, to discuss the merger of Graphic Packaging and Altivity Packaging. To access the conference call, listeners calling from within North America should dial (800) 498-2152 at least 10 minutes before the start of the conference call (Conference ID# 6468488). Listeners may also access the audio webcast at http://www.videonewswire.com/event.asp?id=40833. Replays of the call will be available for one week following the completion of the call and can be accessed by dialing (800) 642-1687.

About Graphic Packaging Corporation

Graphic Packaging Corporation, headquartered in Marietta, Georgia, is a leading provider of paperboard packaging solutions for a wide variety of products to food, beverage and other consumer products companies. The company's customers include some of the most widely recognized companies in the world. Additional information about Graphic Packaging, its business, and its products is available on the company's Web site at http://www.graphicpkg.com.

About Altivity Packaging

Altivity Packaging, LLC, headquartered in Chicago, Illinois, is the largest privately-held producer of folding cartons and holds a leading market position in coated-recycled boxboard and bag packaging. The company operates six recycled boxboard mills and 50 consumer-packaging facilities in North America. Additional information about Altivity Packaging, its business, and its products is available on the company's Web site at http://www.altivity.com.

Additional Information and Where to Find It

In connection with the proposed transaction, Graphic Packaging Corporation expects that a newly-formed holding company will file with the Securities and Exchange Commission (SEC) a Registration Statement on Form S-4 that will include a proxy statement of Graphic Packaging Corporation that also constitutes a prospectus of the newly-formed holding company. Graphic Packaging Corporation will mail the final proxy statement/prospectus to its stockholders.

You may obtain a free copy of the proxy statement/prospectus (if and when it becomes available) and other related documents filed by Graphic Packaging Corporation and the newly formed holding company with the SEC at the SEC's Web site at www.sec.gov. The proxy statement/prospectus (if and when it becomes available) and the other documents may also be obtained for free by accessing Graphic Packaging Corporation's web site at http://www.graphicpkg.com.

Participants in the Solicitation

Graphic Packaging Corporation, its directors and executive officers, other members of management, and employees may be deemed to be participants in the solicitation of proxies from Graphic Packaging Corporation stockholders in respect of the proposed transaction. You can find information about Graphic Packaging Corporation's executive officers and directors in Graphic Packaging Corporation's Annual Report on Form 10-K filed with the SEC on 02 March 2007, and definitive Proxy Statement filed with the SEC on 18 April 2007. You can obtain free copies of these documents and of the proxy statement/prospectus (if and when it becomes available) from Graphic Packaging Corporation by contacting its investor relations department. You may also obtain free copies of these documents by accessing Graphic Packaging Corporation's Web site or the SEC's Web site at the addresses previously mentioned.

Source: Graphic Packaging Corporation


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