Berry Global’s possible $2B sale of nonwoven fabric unit may lift profit: BofA (NYSE:BERY)

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Berry Global Group (NYSE:BERY) is said to be weighing a sale of its business that makes nonwoven fabrics for as much as $2 billion, Bloomberg News reported this week, citing people familiar with the matter. Such a divestment may boost profits for the maker of plastic packaging, analysts at Bank of America said Friday.

“It’s impossible to know what impact a theoretical deal might have without knowing the potential divested EBITDA, transaction tax leakage the proceeds and their application,” George L. Staphos, analyst at BofA, said in an August 11 report. “Purely as a placeholder, we assume EBITDA of $250 million (split 50/50 between EBIT and D&A), no tax leakage and $2 billion of proceeds applied evenly to debt paydown and share buyback.”

Such a scenario could add about $0.23 to reported EPS in fiscal year 2024 because of a smaller number of outstanding shares and lower interest expense, BofA said. The sale also could lower Berry Global’s (BERY) debt ratio to 3.4 times if half of the proceeds are applied to paying off debt.

Berry's (BERY) stock rose 5.3% to a four-week high Thursday after the news report of the potential sale. By comparison, the Standard & Poor's 400 midcap stock index (SP400) was little changed.

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