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Iridian ups stake in Graphic Packaging Holding a massive 166%

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Feb. 24 2015, Updated 9:05 a.m. ET

Iridian’s position in Graphic Packaging Holding

Iridian Asset Management’s recent 13G filing revealed that the fund increased its holdings in Graphic Packaging by a massive 166%. Shares increased from 12,531,297 to 33,334,842, which represents a 10.2% passive stake in the company.

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Overview of Graphic Packaging Holding

Graphic Packaging Holding Company (GPK) provides packaging solutions that cater to a wide range of beverage, food, and other companies that deal in consumer products. The company is a major producer of folding cartons and leads the market in coated recycled board and coated unbleached kraft.

Graphic Packaging shows commendable financial performance

Graphic Packaging Holding generated free cash flow of $350 million in 2014. The company managed to lower its net debt levels and net leverage ratio. It also improved its debt profile, which resulted in lowering its annual interest by about $3 million. The company’s domestic liquidity exceeded $1 billion.

The company’s board of directors has approved a share repurchase program of $250 million.

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Graphic Packaging is expected to benefit from recent acquisitions

Graphic Packaging recently acquired Rose City Printing & Packaging and the paperboard assets of Cascades’ Norampac division. Over the next two years, the company is expected to integrate between 20,000 and 25,000 tons of graphic paperboard, resulting in synergies of $10–$15 million.

Operational efficiencies and clear strategic direction

Graphic Packaging optimized its global converting facilities and network in order to better support its customers and mills. Six Sigma and LEAN projects were implemented to shorten its supply chain and enhance efficiencies throughout the organization.

The company built a business model that vertically integrates its low-cost mills with converting facilities networks, which are highly efficient. As for strategic direction, the company divested its noncore businesses and assets in order to free up capital that can be reinvested in the company’s core business, specifically its mills.

Iridian’s 13G positions

According to its 13G filing, Iridian Asset Management didn’t initiate any new positions.

The fund increased its holdings in the following companies:

  • Myriad Genetics, Inc. (MYGN)
  • Service Corporation International/US (SCI)
  • Avis Budget Group, Inc. (CAR)
  • Omnicare, Inc. (OCR)
  • Halozyme Therapeutics Inc. (HALO)
  • Theravance Inc. (THRX)
  • AOL Inc. (AOL)
  • Lexmark International, Inc. (LXK)
  • The Valspar Corporation (VAL)
  • W.R. Grace and Company (GRA)
  • Sealed Air Corp. (SEE)
  • Pitney Bowes Inc. (PBI)
  • Graphic Packaging Holding Company (GPK)
  • SemGroup Corporation (SEMG)

A significant aspect of the fund’s 13G filings is that Iridian Asset Management dropped the following two key positions:

  • Dresser-Rand Group, Inc. (DRC)
  • Wyndham Worldwide Corporation (WYN)

In the next part of this series, we’ll look at Iridian Asset Management’s holdings in SemGroup Corporatiion (SEMG).

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