Silgan Holdings Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Silgan Holdings (Nasdaq: SLGN  ) surged as much as 17% in early trading and remain up nearly that much as investors cheered its plan to spend $4.1 billion to acquire plastic container maker Graham Packaging (NYSE: GRM  ) .

So what: The deal isn't without risk. With $916 million in debt versus $175 million in cash on its balance sheet, Silgan will solicit as much as $4 billion in outside financing to complete the transaction.

Now what: As Foolish colleague Brian Pacampara points out here, there's probably enough operating leverage in this deal for investors to give Silgan a look.

The price may also be right. Even with today's pop, the stock now trades near its three-year-high multiple to normalized earnings (19.71), reached on July 17, 2007. Shares of Silgan are up more than 43% since. Expect the rally to continue for a while.

Interested in more information on the companies mentioned here? Add Silgan Holdings and Graham Packaging to your watchlist. 

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. You can also try any of our Foolish newsletter services free for 30 days.

Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is at least 10% better than other disclosure policies.

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Related Tickers

10/26/2016 4:00 PM
SLGN $51.58 Up +0.94 +0.00%
Silgan Holdings CAPS Rating: *****
GRM.DL2 $0.00 Down +0.00 +0.00%
Graham Packaging CAPS Rating: *****