$13.2 Billion Deal Creates Largest Privately Held Company in U.S.

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CINCINNATI (AdAge.com) -- Georgia-Pacific Corp. has agreed to be acquired by privately held conglomerate Koch Industries in a deal that relieves the biggest U.S. marketer of paper towels and toilet paper of a heavy debt burden amid bruising competition in the consolidating package-goods industry.

Georgia-Pacific marketing
The $13.2 billion acquisition doesn’t appear to have any immediate impact on marketing operations for Georgia-Pacific, which will become a subsidiary of Koch and remain based in Atlanta, the company said.

The acquisition creates an $80 billion privately held behemoth, the largest privately held company in the U.S., and eclipses even Georgia-Pacific’s biggest global rival, Procter & Gamble Co., which has sales of around $70 billion after its acquisition of Gillette Co. earlier this year. But unlike P&G and most players in package goods, Koch is a conglomerate with far-flung holdings in oil refining, cattle ranching and carpet.

G-P was already a mini-conglomerate, with about $7.7 billion in sales of global consumer products and the rest of its $20 billion in sales coming from packaging and building materials. Still, the consumer-products business appears to push G-P past SC Johnson as the largest privately held package-goods marketer.

Some industry analysts believe SCJ has been strengthened competitively by being privately held, since it doesn’t have to tailor marketing or product launch plans around the need to meet quarterly earnings numbers.

Georgia-Pacific debt relief
The acquisition also relieves G-P of $7.8 billion of its more than $11 billion in debt, much of it taken on to finance the 1999 acquisition of James River. With junk-rated debt and the overhang of asbestos liability from its building-products units, the company operated at a financial disadvantage to its primary rivals, P&G and Kimberly-Clark Corp.

G-P Chairman-CEO A.D. “Pete” Correll in a statement praised Koch as “exceptionally strong financially,” and said it has a “long history of outstanding business success and a dedication to operational excellence.”

G-P is the No. 2 marketer of branded paper towels and toilet paper and the No. 1 marketer of napkins and disposable tabletop products in the U.S., with brands that include Brawny, Quilted Northern, Dixie, Angel Soft and Sparkle. The company also is believed to be the largest private-label manufacturer of tissue and towel products and has a far larger business in Western Europe than its U.S.-based rivals.

Georgia-Pacific’s agencies include Omnicom Group’s DDB Worldwide, New York; Publicis Groupe’s Fallon, Minneapolis, and Zenith Optimedia, New York.

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