By Connor Hart

Greif's $1.8 billion sale of its cardboard box business to Packaging Corp. of America looks like a win-win.

Analysts said the deal, disclosed earlier this week, marks a decisive step in Greif's strategy to streamline its portfolio and concentrate on scalable, higher-return businesses. PCA, meanwhile, stands to benefit from a jolt to its manufacturing capacity at a much-needed time, as it continues adding new customers.

Greif Chief Executive Ole Rosgaard said the company, which makes a variety of industrial packaging products, had to weigh whether it made sense to hold on to an asset that would require billions in investment to become a more dominant player in the containerboard market.

"You have to ask yourself: Is that the best use of your shareholders' money?" Rosgaard said. "Or would they get a better return if you invested in the businesses where you were already number one or number two?"

"If you're not a leader, then you've got no place there," he continued. "Hence, we are out."

By stepping away from the containerboard space, Greif can now focus more investment into businesses where it already has scale and a clearer path to returns. The company has identified sectors like pharmaceuticals, food and beverage, flavor and fragrance, and agricultural chemicals as areas with higher growth potential and better margins than basic shipping boxes.

Analysts say the move should help Greif deliver more consistent, less cyclical earnings, with reduced exposure to commodity pricing and end-market volatility.

Proceeds from the sale will primarily go toward paying down debt. Rosgaard added that offloading the two containerboard mills involved in the deal will also eliminate about $25 million in annual maintenance and operating costs.

For PCA, those mills will likely prove more valuable, adding roughly 800,000 tons of annual production capacity, along with eight sheet-feeder and corrugated plants across the U.S.

Truist Securities analyst Mike Roxland said the additions are well-timed, as PCA has been running close to full capacity. The company, which focuses on making cardboard boxes, has picked up new customers after competitors like International Paper and Smurfit WestRock scaled back from the business.

The acquisition will give PCA the extra capacity it needs more quickly and affordably than building from scratch. While the acquired assets may require upgrades, Roxland said the total cost will still be significantly less than the multibillion-dollar investment required to build new mills.

Analysts estimate the deal could increase PCA's share of the containerboard market to more than 14%, up from about 12%, while boosting production capacity by up to 40% over the next few years.

And Greif may not be done making moves. Rosgaard said the company is actively eyeing new acquisition targets that align with its portfolio strategy and long-term growth goals.

"We have a really strong M&A pipeline," he said. "And we have targets that we are currently talking to within these spaces."

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

July 03, 2025 12:37 ET (16:37 GMT)

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