NEW YORK (CNNfn) - W.R. Grace & Co. will merge its packaging business with Sealed Air Corp., the makers of the famous bubble wrap, in a deal valued at $5 billion.
The tax-free transaction of Grace's Cryovac packaging business will create a new, publicly-traded company called Sealed Air with $2.5 billion in sales, the companies said.
"It triples the size of our business," said Dermot Dunphy, chairman and chief executive of Sealed Air, on CNNfn.
As part of the deal, Grace shareholders will receive 40.9 million common shares valued at $1.9 billion and 36 million new convertible preferred shares in the new Sealed Air valued at $1.8 billion. The convertible shares can be transferred into 31.8 million issues of the new Sealed Air at a price of $56.525 per share. Grace will also invest $1.2 billion in the new company.
Grace shareholders will own 63 percent of the new company, while Sealed Air shareholders will own 37 percent.
The transaction is tax-free to the companies and shareholders.
"This transaction provides Grace shareholders with an immediate premium for Grace's packaging business, the opportunity to participate in the future value of an even stronger packaging company with excellent growth prospects," said Albert Costello, chief executive of Grace.
Dunphy told CNNfn the deal extends his company into 24 new countries. Grace is a global packaging and specialty company with annual sales of $3.5 billion and a presence in 100 countries. The old Sealed Air had annual sales of about $800,000.
"It's a growth merger, not a cost-saving, slash-and-burn merger," Dunphy said. "Size is not important. It's the fit of the two entities that's important.
Grace stock (GRA) closed Thursday up 3 to 69-1/2 on the New York Stock Exchange, while Sealed Air (SEE) was down 1-1/16 to 46-9/16.
-- Martine Costello