Hicks SPAC leads $3.2bn reverse IPO(2)

Graham Packaging, owned by private equity firms Blackstone and Graham Group, has been selected as a takeover target after the Tom Hicks-run SPAC reviewed more than 100 potential deals and tapped into its founder’s relationships with buyout firms.

Private equity veteran Thomas Hicks has leveraged his relationships with buyout firms to obtain a record-setting $3.2 billion (€2 billion) deal for his special purpose acquisition vehicle.

Hicks said during an analysts call that Hicks Acquisition Company I, which raised a record $552 million in its initial public offering last fall, will “in the next day or two” ink a deal to take public Graham Packaging, a plastics company that has been majority-owned by The Blackstone Group for a decade.

Frankly, we were not intending to do anything with the company, whether it was taking it public or selling.

Chinh Chu

“Starting in January we went out proactively to a number of private equity firms that I’ve had long relationships with, including Blackstone,” Hicks said. “We started engaging with Blackstone about 60 days ago on Graham and there was no auction process.”

Prior to setting its sights on Graham, Hicks said the SPAC considered more than 100 deals.

Chinh Chu, a Blackstone senior managing director who sits on Graham’s board, stressed strong growth potential of the plastic company, which makes containers for multinationals including Coca-Cola, Unilever, Clorox, Colgate, Anheuser-Busch and Heinz and is expected to book sales north of $2.4 billion this year.

“Frankly, we were not intending to do anything with the company, whether it was taking it public or selling the company, however we were approached by Tom, [with whom] we have had a very long-term relationship, and by virtue of the conversation, felt it was a good long-term partnership,” Chu said.

The transaction, which the parties involved believe is the largest ever deal between a SPAC and an industrial company, must be approved by more than 50 percent of Hicks Acquisition’s shareholders.

Graham plastics:
everyday products
projected to bestow
extraordinary returns

Post transaction, Tom Hicks and his SPAC will take a 66 percent stake in Graham, while the company’s current equity holders, led by Blackstone and including the Graham family’s private equity firm, Graham Group, will own 34 percent of the company’s common outstanding shares, remaining its largest shareholder.

Under terms of the deal, Graham’s current stockholders will receive $350 million in cash held in a trust, 35 million common shares and 2.8 million warrants. The transaction has been structured so that it does not breach the company’s existing credit facilities nor constitute a change in control.

Blackstone bought the company from Donald Graham in 1998 for $977 million. Management and DB Capital (now MidOcean Partners) participated in the original deal, though it is unclear if they are still equity holders.

Hicks Acquisition was advised by Citi and Akin Gump Strauss Hauer & Feld, while Houlihan Lokey was financial advisor to the independent directors of Hicks Acquisition. Graham Packaging was advised by Deutsche Bank, Blackstone Advisory Partners and Simpson Thacher & Bartlett.