Subsidiary of Citicorp to Buy Papercraft

Papercraft Corp., a leading maker of gift wrappings and artificial Christmas trees, said Tuesday that it will be acquired in a $240-million leveraged buy-out by a subsidiary of Citicorp and other investors that include Papercraft company managers.

Papercraft will be bought by a new corporation to be formed by Citicorp Capital Investors Ltd., a group of institutional investors and certain members of Papercraft’s management, Chairman Marshall P. Katz said.

“It is an opportunity for shareholders in the company to realize what we think is a very attractive opportunity for them and for the inside members of management to participate in the future of the company,” he said. Katz said he and his father, Senior Chairman Joseph Katz, are two of the participating managers.

The transaction, which is not expected to alter the company’s present operations, is subject to final approval by Papercraft’s board of directors and stockholders. The proposal will be submitted to shareholders at a special meeting, Katz said.

The board of directors approved an agreement in principle that calls for Papercraft shareholders to receive $22.12 per share, of which $18 is to be cash and the rest in debentures of the new firm. The stock closed Monday at $16.875 on the New York Stock Exchange and climbed to $19.25 Tuesday morning.

As part of the agreement, Papercraft said it will give Citicorp an option to buy 2.15 million shares of Papercraft common stock, amounting to 18.5% of outstanding shares, at a cash price of $20 each.

Papercraft reported 1984 earnings of $14.6 million, or $1.25 a share, compared to $11.7 million, or $1.03 a share, in 1983. Revenue in 1984 was $177.9 million, up from $165.2 million the year before.

Papercraft is a diversified consumer products company that also makes LePage’s tapes, Ty-D-Bol toilet cleaner, Esquire shoe-care products, Papercraft gift wrappings, Mountain King synthetic Christmas trees, Royal bath and kitchen towels and Modern Ortho foot-care products.

The company employs 2,500.