Berry Global Group Inc. is spinning off its Health, Hygiene and Specialties segment as part of a $3.6 billion merger with Glatfelter Corp.
After the spinoff of the HH&S business, which makes nonwovens and films, the remainder of Berry will be a $10.2 billion company focused on consumer packaging.
"The really good thing about this is we now, sitting here today, have a very clear path. And we're already focusing our internal efforts and strategy around our core business, knowing that we have created a good outcome for our shareholders and an absolutely clear path here forward," Berry CEO Kevin Kwilinski said on a Feb. 7 call with analysts.
The spun off business, which has not been named, will be led by Curt Begle, who is now the president of Berry's HH&S unit.
The new company will have sales of $3.6 billion — $2.2 billion from the former Berry business, and $1.4 billion from Glatfelter, which makes fiber-based engineered materials.
The roots of the HH&S division date to Berry's 2015 acquisition of nonwovens company Avintiv Inc. for $2.5 billion, before Kwilinski joined the company. He became CEO last year after serving as president and CEO of Multi-Color Corp., a label manufacturer.
Weeks after he joined Berry, Kwilinski announced plans to sell or spin off the HH&S business. In the Feb. 7 call, he explained the unit is not a good fit with the rest of Berry.
"I think it's important to think a little bit about the path that Berry has taken to where it is today," Kwilinski said. When it bought Avintiv, Berry "really needed to create the sort of global presence and scale that allowed them to be an effective competitor," he said.
But in 2019, Berry acquired global packaging competitor RPC Group plc in a blockbuster $4.37 billion deal. Kwilinski said the RPC deal gave Berry the global scale it needed, and was also "much more core" to Berry's consumer packaging portfolio.
Financial results in the HH&S business suffered during the pandemic. Kwilinski added that unlike plastics processing, where an investment in injection molding or thermoforming capacity might cost $10 million, an investment in new capacity in the HH&S business could be eight to 10 times higher.
"And that created a lumpiness as that capacity comes online, and the market is absorbing it, especially if others are making investments at the same time. And that created a lot more volatility of earnings. And that's really the core issue with it being part of a Berry," Kwilinski said.
The newly spun-off company will have about 8,650 employees and 45 manufacturing plants.
Berry shareholders will own 90 percent of the company, and Glatfelter shareholders will own the remaining 10 percent.