PTV Pactiv Corp.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant      ý
Filed by a Party other than the Registrant      o

Check the appropriate box:

o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a- 6(e)(2) )
ý		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

PACTIV CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
ý		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)

Title of each class of securities to which the transaction applies:

Common Stock of Pactiv Corporation, par value $0.01 per share (the “common stock”)

o

(2)

Aggregate number of securities to which the transaction applies:

136,196,665 shares of common stock, including 3,200,000 shares issued to the Pactiv Rabbi Trust and 114,700 shares of restricted stock; as well as 3,268,413 shares underlying options to purchase common stock and performance share awards with respect to 2,031,816 shares of common stock.

(3)

Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

The maximum aggregate value was determined based upon the sum of (a) 136,196,665 shares of common stock multiplied by the merger consideration of $33.25 per share; (b) options to purchase 3,268,413 shares of common stock with exercise values of less than the merger consideration of $33.25 multiplied by $12.51 (which is the difference between $33.25 and the weighted average exercise price for such shares of $20.74 per share); and (c) performance share awards with respect to 2,031,816 shares of common stock multiplied by the merger consideration of $33.25 per share. In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying 0.00007130 by the sum calculated in the preceding sentence.

(4)

Proposed maximum aggregate value of the transaction: $4,636,984,839.88

(5)

Total fee paid: $330,617.02

ý		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)

Amount Previously Paid:

(2)

Form, Schedule or Registration Statement No.:

(3)

Filing Party:

(4)

Date Filed:

 

 

Pactiv Corporation

1900 West Field Court

Lake Forest, Illinois 60045

Telephone: (847) 482-2000

 

October 15, 2010

 

Dear Stockholder:

 

You are cordially invited to attend a special meeting of stockholders of Pactiv Corporation to be held on November 15, 2010 at the Hilton Garden Inn, 26225 North Riverwoods Boulevard, Lake Forest, Illinois 60045, at 3:00 p.m., Chicago time. At the special meeting, you will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of August 16, 2010, by and among Pactiv, Rank Group Limited, a company organized under the laws of New Zealand, Reynolds Group Holdings Limited, a company organized under the laws of New Zealand, and Reynolds Acquisition Corporation, a Delaware corporation and indirect wholly owned subsidiary of Reynolds. Reynolds is an affiliate of Rank Group. Pursuant to the merger agreement, Reynolds Acquisition Corporation will merge with and into Pactiv and Pactiv will become an indirect wholly owned subsidiary of Reynolds.

 

If the merger is completed, holders of Pactiv common stock will receive $33.25 in cash, or the merger consideration, without interest and less any applicable withholding tax, for each share of Pactiv common stock owned by them as of the date of the merger.

 

After careful consideration, our board of directors determined that the merger agreement and the merger are advisable, fair to and in the best interests of Pactiv stockholders . Our board of directors has unanimously approved the merger agreement. Our board of directors recommends that you vote “FOR” adoption of the merger agreement and approval of the transactions contemplated thereby at the special meeting.

 

Our board of directors considered a number of factors in evaluating the transaction and consulted with its legal and financial advisors in so doing. The enclosed proxy statement also provides detailed information about the merger agreement and the merger. We encourage you to read the proxy statement carefully.

 

Your vote is very important, regardless of the number of shares you own. The merger must be approved by the holders of a majority of shares of our outstanding common stock. Therefore, if you do not return your proxy card, vote via the Internet or telephone or attend the special meeting and vote in person, it will have the same effect as if you voted “AGAINST” adoption of the merger agreement and approval of the transactions contemplated thereby. Only stockholders who owned shares of Pactiv common stock at the close of business on October 14, 2010, the record date for the special meeting, will be entitled to vote at the special meeting. On behalf of our board of directors, I urge you to sign, date and return the enclosed proxy card, or vote via the Internet or telephone as soon as possible, even if you currently plan to attend the special meeting.

 

On behalf of our board of directors, I thank you for your support and appreciate your consideration of this matter.

 

Sincerely,

 

Richard L. Wambold

Chairman and Chief Executive Officer

 

This proxy statement is dated October 15, 2010 and is being mailed to stockholders of Pactiv on or about October 15, 2010.

 

 

Pactiv Corporation

1900 West Field Court

Lake Forest, Illinois 60045

Telephone: (847) 482-2000

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

AND PROXY STATEMENT

 

YOUR VOTE IS VERY IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY.

 

Notice is hereby given that a special meeting of stockholders of Pactiv Corporation, a Delaware corporation, will be held on November 15, 2010 at the Hilton Garden Inn, 26225 North Riverwoods Boulevard, Lake Forest, Illinois 60045, at 3:00 p.m., Chicago time, for the following purposes:

 

1. To consider and vote upon the adoption of the Agreement and Plan of Merger, dated as of August 16, 2010, by and among Pactiv, Rank Group Limited, Reynolds Group Holdings Limited and Reynolds Acquisition Corporation, an indirect wholly owned subsidiary of Reynolds, pursuant to which Reynolds Acquisition Corporation will merge with and into Pactiv, with Pactiv becoming an indirect wholly owned subsidiary of Reynolds, and each outstanding share of Pactiv common stock will be converted into the right to receive $33.25 in cash;

 

2. To consider and vote upon a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes in favor of adopting the merger agreement and approving the transactions contemplated thereby at the time of the special meeting; and

 

3. To transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting.

 

You are entitled to vote at the special meeting if you were a stockholder of record at the close of business on October 14, 2010. Your vote is important. The affirmative vote of the holders of a majority of Pactiv’s outstanding common stock is required to adopt the merger agreement and approve the transactions contemplated thereby. Holders of Pactiv common stock are entitled to appraisal rights under Delaware law in connection with the merger if they meet certain conditions. See “The Merger — Appraisal Rights” beginning on page 44 of the proxy statement and Annex C hereto.

 

All stockholders are cordially invited to attend the special meeting in person. Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy or vote via the Internet or telephone and thus ensure that your shares will be represented at the special meeting if you are unable to attend. If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of adoption of the merger agreement and approval of the transactions contemplated thereby and in favor of adjournment of the special meeting, if necessary or appropriate, to permit solicitations of additional proxies. If you fail to return your proxy card and do not vote via the Internet or by telephone, your shares will effectively be counted as a vote against adoption of the merger agreement and approval of the transactions contemplated thereby and will not be counted for purposes of determining whether a quorum is present at the special meeting or for purposes of the vote to adjourn the special meeting, if necessary or appropriate, to permit solicitations of additional proxies. If you do attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

 

Our board of directors recommends that you vote “FOR” adoption of the merger agreement and approval of the transactions contemplated thereby at the special meeting and “FOR” adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes in favor of adopting the merger agreement and approving the transactions contemplated thereby at the time of the special meeting.

 

By Order of the Board of Directors,

 

Joseph E. Doyle
Secretary

 

PACTIV CORPORATION

 

SPECIAL MEETING OF STOCKHOLDERS

 

TABLE OF CONTENTS

 

 

The following Q&A is intended to address some commonly asked questions regarding the merger. These questions and answers may not address all questions that may be important to you as a Pactiv stockholder. We urge you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement.

 

Except as otherwise specifically noted in this proxy statement, “we,” “our,” “us” and similar words in this proxy statement refer to Pactiv Corporation. Throughout this proxy statement we refer to Pactiv Corporation as “Pactiv” and to Reynolds Group Holdings Limited as “Reynolds.” In addition, throughout this proxy statement, we refer to Rank Group Limited as “Rank Group” and Reynolds Acquisition Corporation as “Sub.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Georgeson Inc.
199 Water Street, 26 ^th Floor
New York, NY 10038
(866) 295-3782

 

Neither the Securities and Exchange Commission, or SEC, nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosures in this proxy statement. Any representation to the contrary is a criminal offense.

 

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. To understand the merger more fully and for a more complete description of the legal terms of the merger, you should read carefully this entire proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement. See “Where You Can Find More Information” beginning on page 77. The merger agreement is attached as Annex A to this proxy statement. We encourage you to read the merger agreement, which is the legal document that governs the merger.

The Companies (page 19)

 

Pactiv Corporation

1900 West Field Court

Lake Forest, Illinois 60045

Telephone: (847) 482-2000

 

Pactiv.   We are a leading producer of consumer and foodservice/food packaging products. With one of the broadest product lines in the specialty packaging industry, we derive more than 80% of our sales from market sectors in which we hold the No. 1 or No. 2 market share position. Our business operates 47 manufacturing facilities in North America, and one in Germany. We also have two joint-venture interests in China. In 2009, 96% of our $3.4 billion in sales was generated in North America.

 

Rank Group Limited

Level Nine

148 Quay Street

Auckland 1140 New Zealand

Telephone: (64 9) 366-6259

 

Rank Group Limited.   Rank Group is a private company headquartered in New Zealand that is wholly owned by Mr. Graeme Hart. It and its affiliates owned by Mr. Hart own businesses engaged in packaging (in particular beverage packaging), consumer products and building supplies.

 

Reynolds Group Holdings Limited

Level Nine

148 Quay Street

Auckland 1140 New Zealand

Telephone: (64 9) 366-6259

 

Reynolds Group Holdings Limited.   Reynolds, an affiliate of Rank Group, is a leading global manufacturer and supplier of consumer food and beverage packaging and storage products and operates through five primary segments: Reynolds Consumer, Reynolds Foodservice, SIG, Evergreen and Closures.

 

Reynolds Acquisition Corporation

c/o Reynolds Group Holdings Limited

Level Nine

148 Quay Street

Auckland 1140 New Zealand

Telephone: (64 9) 366-6259

 

Reynolds Acquisition Corporation.   Reynolds Acquisition Corporation was formed by Reynolds solely for the purpose of entering into the merger agreement with Pactiv and completing the merger. Sub has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement.

 

If the merger is completed, you will receive $33.25 in cash, without interest and less any applicable withholding tax, in exchange for each share of Pactiv common stock that you own and for which you have not properly exercised appraisal rights.

After the merger is completed, you will have the right to receive the merger consideration, but you will no longer have any rights as a Pactiv stockholder as a result of the merger. Pactiv stockholders will receive the merger consideration in exchange for their Pactiv stock in accordance with the instructions contained in the letter of transmittal to be sent to holders of our common stock shortly after the closing of the merger.

 

At the effective time of the merger, each outstanding option granted under our 2002 Incentive Compensation Plan or any other equity-based compensation plan of Pactiv, whether or not vested or exercisable, will be cancelled and converted into the right to receive an amount in cash, without interest and less any applicable withholding tax, equal to the product of:

 

 

At the effective time of the merger, each outstanding restricted stock award granted under our 2002 Incentive Compensation Plan or any other equity-based compensation plan of Pactiv, will fully vest and such awards will be cancelled and converted into the right to receive the $33.25 per share in the same manner as shares of our common stock, with such payment to be subject to any applicable withholding tax.

 

At the effective time of the merger, each outstanding performance share award granted under our 2002 Incentive Compensation Plan or any other equity-based plan will be cancelled in exchange for an amount in cash, without interest and less any applicable withholding tax, equal to the product of $33.25 and that number of shares determined as the sum of (x) with respect to any completed calendar year(s) or other measuring period(s) for the award, the number of shares notionally or conditionally vested by us for the portion of the award related to such year(s) or period(s) plus (y) with respect to any calendar year(s) or other measuring period(s) for which we have not allocated a notional or conditional number of shares (including the current and future years), the number of shares determined as if 100% of any performance targets or goals were achieved during such year(s) or period(s) and assuming satisfaction of all other conditions for receiving the target amount with respect to all such awards had been met.

 

Subject to the satisfaction of the obligations set forth above, we will terminate our 2002 Incentive Compensation Plan and any other equity-based plan as of the effective time of the merger.

 

At the time the 2010 annual cash bonuses would have been paid under the terms of the applicable plan (or on the closing date of the merger for participants of our Amended and Restated Pactiv Corporation Change-in-Control Severance Benefit Plan for Key Executives), we will pay to each participant who has been granted an annual cash bonus in respect of the 2010 calendar year under each of our Executive Incentive Compensation Plan and 2002 Incentive Compensation Plan a minimum bonus equal to a pro rata portion (based on elapsed time through the effective time of the merger) of the cash payment that would have been made thereunder if 100% of any performance targets or goals for the calendar year were achieved and all other conditions for receiving payment were met. Any participant who voluntarily terminates his or her employment with Pactiv prior to the end of the 2010 calendar year will forfeit the right to any minimum bonus. In the event that the merger closes in 2011, the same principles will apply with respect to the payment of annual cash bonuses for the 2011 calendar year. All bonus payments are subject to applicable tax withholding.

 

As of the effective time of the merger, we will terminate our Deferred Compensation Plan and Deferred Retirement Savings Plan. We will pay to each participant under each plan the balance of each such participant’s deferred compensation account (whether vested or unvested) in a lump sum cash payment in accordance with the terms and conditions set forth in each plan. In addition, as of or prior to the effective time of the merger, we will terminate our Supplemental Executive Retirement Plan and pay to each participant his or her accrued benefit in a lump sum cash payment, in accordance with Section 409A of the Internal Revenue Code of 1986, or the Code. Any payments made under each plan will be subject to applicable tax withholding and, if applicable, holding periods required by Section 409A of the Code.

 

Our common stock is quoted on The NYSE under the symbol “PTV.” On May 14, 2010, the last trading day prior to published reports regarding the potential sale of Pactiv, the closing price of our common stock was $23.97 per share, on August 16, 2010, the last full trading day before the public announcement of the merger, the closing price for our common stock was $30.92 per share and on October 14, 2010, the latest practicable trading day before the printing of this proxy statement, the closing price for our common stock was $33.07 per share.

 

The exchange of shares of common stock for the $33.25 per share cash merger consideration will be a taxable transaction to our stockholders for U.S. federal income tax purposes.

 

Tax matters can be complicated, and the tax consequences of the merger to you will depend on the facts of your own situation. We recommend that you consult your own tax advisor to fully understand the tax consequences of the merger to you.

 

Our board of directors recommends that you vote “FOR” adoption of the merger agreement and approval of the transactions contemplated thereby and “FOR” adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes in favor of adopting the merger agreement and approving the transactions contemplated thereby at the time of the special meeting.

 

At a special meeting of our board of directors on August 15, 2010, after careful consideration, including consultation with financial and legal advisors, our board of directors unanimously determined that the merger agreement and the merger are advisable, fair to and in the best interests of Pactiv stockholders and approved the merger agreement. In the course of reaching its decision over several board meetings, our board of directors consulted with our senior management, financial advisors and legal counsel, reviewed a significant amount of information and considered a number of factors, including, among others, the following:

 

 

 

 

 

 

 

Our board of directors also considered potentially negative factors in its deliberations concerning the merger including, among others, the following:

 

 

 

During its consideration of the transaction with Reynolds, our board of directors was also aware that some of our directors and executive officers may have interests with respect to the merger, that are, or may be, different from, or in addition to those of Pactiv stockholders generally, as described in “The Merger — Interests of Pactiv’s Directors and Executive Officers in the Merger” beginning on page 38.

 

While our board of directors considered potentially positive and potentially negative factors, our board of directors concluded that, overall, the potentially positive factors far outweighed the potentially negative factors.

 

In view of the variety of factors considered in connection with its evaluation of the merger, our board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation, including the financial analyses presented to our board of directors by Perella Weinberg and the opinion of Perella Weinberg described under the caption “The Merger — Opinion of Perella Weinberg, Financial Advisor to the Board of Directors of Pactiv” on page 28. In addition, individual directors may have given differing weights to different factors, including the financial analyses presented to our board of directors by Perella Weinberg and the opinion of Perella Weinberg described under the caption “The Merger — Opinion of Perella Weinberg, Financial Advisor to the Board of Directors of Pactiv” on page 28.

 

Perella Weinberg Partners LP, or Perella Weinberg, rendered its oral opinion, subsequently confirmed in writing, to the board of directors of Pactiv that, on August 15, 2010, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in the opinion, the $33.25 cash per share merger consideration to be received by holders of shares of Pactiv common stock (other than Reynolds, Sub or any other direct or indirect wholly owned subsidiary of Reynolds, or collectively the Reynolds Affiliates) in the merger was fair, from a financial point of view, to such holders.

 

The full text of Perella Weinberg’s written opinion, dated August 15, 2010, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by Perella Weinberg, is attached as Annex B and is incorporated by reference herein. Holders of shares of Pactiv common stock are urged to read the opinion carefully and in its entirety. The opinion does not address Pactiv’s underlying business decision to enter into the merger or the relative merits of the merger as compared with any other strategic alternative which may have been available to Pactiv. The opinion does not constitute a recommendation to any holder of Pactiv common stock as to how such holder should vote or otherwise act with respect to the merger or any other matter. In addition, Perella Weinberg expressed no opinion as to the fairness of the merger to, or any consideration to, the holders of any other class of securities, creditors or other constituencies of Pactiv. Perella Weinberg provided its opinion for the information and assistance of the board of directors of Pactiv in connection with, and for the purposes of its evaluation of, the merger. This summary is qualified in its entirety by reference to the full text of the opinion.

 

We anticipate that the total amount of funds necessary to complete the merger and the related transactions, including the funds needed to (i) pay our stockholders the amounts due under the merger agreement, (ii) refinance, repay or repurchase certain of our outstanding indebtedness, and (iii) pay customary fees and expenses in connection with the transactions contemplated by the merger agreement, will be approximately $5.7 billion.

 

Pactiv has been advised by Reynolds that on September 30, 2010, Reynolds entered into an amendment to its existing Credit Agreement, dated as of November 5, 2009, as amended or restated from time to time, between Reynolds, certain of its subsidiaries, the other borrowers set forth therein, the lenders party thereto and Credit Suisse AG, as administrative agent, or the senior secured credit facility, pursuant to which incremental lenders committed to provide incremental term loans in an aggregate principal amount equal to $2,020 million, to be funded on, or in escrow prior to, the closing date of the merger. The proceeds of such incremental term loans will be used to finance,

in part, the acquisition, repay certain Pactiv indebtedness, and pay associated transaction costs. Pactiv also has been advised by Reynolds that it intends to finance the merger and associated transaction costs with a revised capital structure consisting of a combination of $2,020 million aggregate principal amount of additional indebtedness under its existing senior secured credit facility, $1.5 billion of 7.125% Senior Secured Notes due 2019, $1.5 billion of 9.000% Senior Notes due 2019, and approximately $711 million of new equity and available cash. The closing of Reynolds’ notes offering is subject to customary closing conditions, some of which are beyond the control of Reynolds, and there is no guarantee that the offering will close in a timely manner, or at all.

 

Reynolds and certain of its affiliates have received (i) an equity commitment for an aggregate investment of up to approximately $2 billion from Rank Group and (ii) debt commitments from Credit Suisse Securities (USA) LLC, Credit Suisse AG, or CS, HSBC Securities (USA) Inc., HSBC Bank USA, National Association, or HSBC Bank and Australia and New Zealand Banking Group Limited and its affiliates, or ANZ, and pursuant to joinders, Sumitomo Mitsui Banking Corporation, or Sumitomo, and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, or Rabobank, to provide $5 billion of aggregate debt financing, subject to adjustments, including to reflect (x) certain alternative debt financing (including certain of the debt incurred pursuant to the amendment to Reynolds’ existing senior secured credit facility) that may be incurred, and (y) any issuance of the notes described above prior to the consummation of the merger. Both the equity and debt financings are subject to certain conditions.

 

Reynolds’ obligation to close the merger is not conditioned on the receipt of equity or debt financing.

 

Date, Time and Place.   A special meeting of our stockholders will be held on November 15, 2010 at the Hilton Garden Inn, 26225 North Riverwoods Boulevard, Illinois 60045, at 3:00 p.m., Chicago time, to:

 

 

Record Date; Shares Entitled to Vote; Quorum.   You are entitled to vote at the special meeting if you owned shares of our common stock at the close of business on October 14, 2010, the record date for the special meeting. You will have one vote at the special meeting for each share of our common stock you owned at the close of business on the record date. There are approximately 136,357,017 shares of our common stock entitled to be voted at the special meeting. A quorum of stockholders is necessary to hold a valid special meeting. Under our bylaws, a quorum is present at the special meeting if the holders of shares of common stock entitled to cast a majority of votes at the special meeting are present either in person or by proxy.

 

Vote Required.   The approval of the merger agreement requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding at the close of business on the record date. Approval of a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of the holders of a majority of the shares of our common stock, in person or represented by proxy, at the special meeting, provided a quorum is present in person or represented by proxy at the special meeting.

 

When considering the recommendation of Pactiv’s board of directors, you should be aware that members of Pactiv’s board of directors and Pactiv’s executive officers have interests in the merger other than their interests as Pactiv stockholders generally, including those described below. These interests may be different from, or in conflict with, your interests as Pactiv stockholders. The members of our board of directors were aware of these additional interests, and considered them, when they approved the merger agreement.

 

 

 

 

Each party’s obligation to effect the merger is subject to the satisfaction or, to the extent permitted, waiver of various conditions, which include the following:

 

 

 

Reynolds and Sub will not be obligated to effect the merger unless the following conditions are satisfied or waived:

 

 

We will not be obligated to effect the merger unless the following conditions are satisfied or waived:

 

 

 

The merger agreement provides that we will not, and will cause our subsidiaries not to, and will use our reasonable best efforts to cause our and our subsidiaries’ respective officers, directors, employees and other representatives not to:

 

 

We have agreed that we will, and will direct each of our representatives to, immediately cease any solicitations, discussions or negotiations with any person (other than Reynolds and Sub) that has made or indicated an intention to make an acquisition proposal.

 

Notwithstanding the above, in the event that, prior to our stockholders having adopted the merger agreement and approved the transactions contemplated thereby, we receive a written acquisition proposal, we and our board of directors may participate in discussions or negotiations with, or furnish any information to, any person making such acquisition proposal and its representatives or potential sources of financing (provided that (i) such person will have first entered into a confidentiality agreement that contains confidentiality provisions that are no less favorable to us than those contained in our confidentiality agreement with Rank Group and (ii) all such information has previously been provided or made available to Reynolds or is provided or made available to Reynolds substantially concurrently with the time it is so furnished) if our board of directors determines in good faith, after consultation with outside legal counsel and financial advisor, that such person is reasonably likely to submit to us an acquisition proposal that is a superior proposal.

 

Our board of directors may not (i) approve, endorse or recommend a superior proposal or enter into a definitive agreement with respect to a superior proposal or (ii) qualify, modify or amend in a manner adverse to Reynolds or withhold or withdraw (or publicly propose to do any of the foregoing) the recommendation to our stockholders to adopt the merger agreement and approve the transactions contemplated thereby, except that our board of directors may, at any time prior to our stockholders having adopted the merger agreement, make a change in its recommendation:

 

 

Notwithstanding anything to the contrary in the agreement, we may not make a change in recommendation to our stockholders unless:

 

 

We and Reynolds can terminate the merger agreement under certain circumstances, including:

 

 

We can terminate the merger agreement:

 

 

Reynolds can terminate the merger agreement:

 

 

Except as otherwise provided for below and in certain circumstances described under “The Merger Agreement — Financing” and “The Merger Agreement — Actions with Respect to Existing Notes,” all costs and expenses incurred in connection with the merger, the merger agreement, and the consummation of the transactions contemplated by the merger agreement will be paid by the party incurring such costs and expenses.

 

Company Payments

 

The merger agreement requires that we pay Reynolds a termination payment of $160 million if:

 

 

 

The merger agreement also requires that we pay Reynolds a termination payment of $160 million if Reynolds terminates the merger agreement because our board of directors has effected a change in recommendation and:

 

 

The merger agreement requires that we pay Reynolds a termination payment of $500 million if the merger agreement is terminated:

 

 

 

 

For purposes of determining whether a termination payment is payable by us, an “acquisition proposal” means any inquiry, offer or proposal made by any person or group of persons other than Reynolds, Sub or of any their respective affiliates, relating to any direct or indirect acquisition or purchase of a business that constitutes 51% or more of the consolidated total revenues or consolidated total assets of Pactiv and its subsidiaries, taken as a whole, or securities of Pactiv representing 51% or more of the outstanding voting capital stock of Pactiv or any tender offer, exchange offer, merger, reorganization, consolidation, share exchange or other business combination that if consummated would result in any person or group of persons beneficially owning more than 51% of the outstanding voting capital stock of Pactiv.

 

Reynolds Fees

 

If the termination date remains March 16, 2011 because Reynolds has not extended such date to seek to obtain certain regulatory approvals as described in “The Merger Agreement — Termination of the Merger Agreement” and the merger agreement is terminated by:

 

 

 

 

 

 

 

For purposes of the foregoing, Reynolds will not be required to make any such payments if the financing contemplated by the debt and equity commitment letters (or any replacement thereof permitted or required by the merger agreement) would not have been available as a result of the failure of our representation and warranty in the merger agreement with respect to our financial statements to be true and correct in all material respects.

 

If Reynolds has extended the termination date to June 16, 2011 in order to seek to obtain certain regulatory approvals and the merger agreement is terminated by:

 

 

In no event will (i) we be required to pay the $160 million termination payment (which will be credited against any payment of the $500 million termination payment that may be required to be paid by us) or the $500 million termination payment on more than one occasion and (ii) Reynolds be required to pay the $250 million termination fee (which will be credited against any payment of the $500 million termination fee that may be required to be paid by Reynolds) or the $500 million termination fee on more than one occasion.

 

The HSR Act prohibits us from completing the merger until we have furnished certain information and materials to the DOJ and the FTC and the applicable waiting periods have expired or been terminated. Pactiv and Reynolds each filed their HSR Act premerger notifications on August 23, 2010. The 30-day waiting period expired on September 22, 2010 without a request for additional information or documentary material issued by the DOJ or FTC.

 

In addition, we were required to make filings with competition authorities in several foreign jurisdictions, and in certain circumstances, receive their approval prior to consummation of the merger. We and Reynolds have made the filings required in Austria, Germany and Mexico, and received the applicable approvals in Austria and Germany, and in Mexico the applicable waiting period has expired.

Appraisal Rights

 

Under Delaware law, holders of our common stock are entitled to exercise appraisal rights in connection with the merger.

 

If you do not vote in favor of adoption of the merger agreement and approval of the transactions contemplated thereby and instead perfect your appraisal rights under Delaware law, you will have the right to a judicial appraisal of the “fair value” of your shares in connection with the merger. This value could be more than, less than, or the same as the value of the right to receive merger consideration in the merger.

 

In order to preserve your appraisal rights, you must take all the steps provided under Delaware law within the appropriate time periods. Failure to follow exactly the procedures specified under Delaware law will result in the loss of appraisal rights. The relevant section of Delaware law regarding appraisal rights is reproduced and attached as Annex C to this proxy statement. We encourage you to read these provisions carefully and in their entirety.

 

ANY PACTIV STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE HIS OR HER RIGHT TO DO SO SHOULD REVIEW ANNEX C CAREFULLY AND SHOULD CONSULT HIS OR HER LEGAL ADVISOR, SINCE FAILURE TO TIMELY COMPLY WITH THE PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH RIGHTS.

 

This proxy statement contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. These forward-looking statements are not based on historical facts, but rather on our current expectations or projections about future events. Accordingly, these forward-looking statements are subject to known and unknown risks and uncertainties. While we believe that the assumptions underlying these forward-looking statements are reasonable and make the statements in good faith, actual results almost always vary from expected results, and differences could be material. Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors, including, without limitation:

 

 

 

 

 

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010, Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2010 and other reports we file with the SEC identify other factors that could cause such differences (see Item 1A. “Risk Factors” therein). No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

 

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. Pactiv stockholders are advised, however, to consult any future disclosures we make on related subjects as may be detailed in our other filings made from time to time with the SEC.

MARKET PRICES AND DIVIDEND DATA

 

Our common stock is listed on the NYSE under the symbol “PTV.” This table shows, for the periods indicated, the range of intraday high and low per share sales prices for our common stock as reported on the NYSE and the frequency and amount of cash dividends declared on our common stock.

 

 

The following table sets forth the closing price per share of our common stock, as reported on the NYSE on May 14, 2010, the last trading day prior to published reports regarding the potential sale of Pactiv, on August 16, 2010, the last full trading day before the public announcement of the merger, and on October 14, 2010, the latest practicable trading day before the printing of this proxy statement:

 

 

Following the merger, there will be no further market for our common stock and our stock will be delisted from the NYSE and deregistered under the Exchange Act.

 

We did not pay a cash dividend on our common stock in the fiscal years ended December 31, 2008 and December 31, 2009 and have not paid a cash dividend this year. We currently intend to retain all future earnings for use in our business. In addition, under the merger agreement, we have agreed not to pay any cash dividends on our common stock before completion of the merger.

 

The enclosed proxy is solicited on behalf of our board of directors for use at the special meeting of stockholders or at any adjournment or postponement thereof.

 

We will hold the special meeting on November 15, 2010 at the Hilton Garden Inn, 26225 North Riverwoods Boulevard, Lake Forest, Illinois 60045, at 3:00 p.m., Chicago time.

 

At the special meeting, we will ask our stockholders to adopt the merger agreement and approve the transactions contemplated thereby, and, if there are not sufficient votes in favor of adoption of the merger agreement and approval of the transactions contemplated thereby, to adjourn the special meeting to a later date to solicit additional proxies.

 

Only holders of record of our common stock at the close of business on October 14, 2010, the record date, are entitled to notice of, and to vote at, the special meeting. On the record date, approximately 136,357,017 shares of our common stock were issued and outstanding and held by approximately 27,490 holders of record. Holders of record of our common stock on the record date are entitled to one vote per share at the special meeting on the proposal to adopt the merger agreement and approve the transactions contemplated thereby and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

A quorum of stockholders is necessary to hold a valid special meeting. Under our bylaws, a quorum is present at the special meeting if the holders of shares of our common stock entitled to cast a majority of votes at the special meeting are present, either in person or by proxy. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be adjourned to solicit additional proxies. For purposes of determining the presence or absence of a quorum, abstentions and “broker non-votes” (where a broker or nominee does not exercise discretionary authority to vote on a matter) will be counted as present.

 

Adoption of the merger agreement and approval of the transactions contemplated thereby requires the affirmative vote of the holders of at least a majority of the outstanding shares of our common stock. Adoption of the merger agreement and approval of the transactions contemplated thereby is a condition to the closing of the merger.

Approval of any proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of the holders of a majority of the shares of our common stock present, in person or represented by proxy, at the special meeting, provided a quorum is present in person or by proxy at the special meeting.

 

If a Pactiv stockholder abstains from voting, it will count as a vote against adoption of the merger agreement and approval of the transactions contemplated thereby and against the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. Each “broker non-vote” will also count as a vote against adoption of the merger agreement and approval of the transactions contemplated thereby but will have no effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

At the close of business on October 14, 2010, the record date for the special meeting, our directors and executive officers beneficially owned 2,663,952 shares of our common stock, which represented approximately 1.9% of the shares of our outstanding common stock on that date.

 

If your shares are registered in your name, you may cause your shares to be voted by returning a signed proxy card or may vote in person at the special meeting. Additionally, you may submit a proxy authorizing the voting of your shares over the Internet by accessing www.proxyvote.com and following the on-screen instructions or telephonically by calling 1-800-690-6903 and following the telephone voting instructions. Proxies submitted over the Internet or by telephone must be received by 11:59 p.m., Eastern time, on November 14, 2010. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy over the Internet or telephone. Based on your Internet and telephone proxies, the proxy holders will vote your shares according to your directions.

 

If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the special meeting in person.

 

Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted “FOR” adoption of the merger agreement and approval of the transactions contemplated thereby and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

If your shares are held in “street name” through a broker or bank, you may vote through your broker or bank by completing and returning the voting form provided by your broker or bank, or by the Internet or telephone through your broker or bank if such a service is provided. To vote via the Internet or telephone through your broker or bank, you should follow the instructions on the voting form provided by your broker or bank. If you do not return your bank’s or broker’s voting form, do not vote via the Internet or telephone through your broker or bank, if possible, or do not attend the special meeting and vote in person with a proxy from your broker or bank, it will have the same effect as if you voted “AGAINST” adoption of the merger agreement and approval of the transactions contemplated thereby.

 

If you are a participant in the Pactiv Corporation 401(k) Savings and Investment Plan or the Pactiv Hourly 401(k) Savings and Investment Plan and wish to vote your shares, you should follow the instructions provided by the applicable plan trustee. Please consult the voting form used by the applicable plan trustee for information on how to submit your instructions. If you do not provide voting instructions by 11:59 p.m., Eastern time, on November 11, 2010, shares allocated to your plan account(s) will be voted by the applicable plan trustee in the same proportion as those shares held by the plan for which the applicable plan trustee has received voting instructions from plan participants.

 

Any proxy you give pursuant to this solicitation may be revoked by you at any time before it is voted. Proxies may be revoked by one of three ways.

 

 

 

If you did not submit a later-dated new proxy card via the Internet or telephone, any written notice of revocation or subsequent proxy should be delivered to Pactiv Corporation, 1900 West Field Court, Lake Forest, Illinois 60045, Attention: Secretary, or hand delivered to Pactiv’s Secretary or his representative, in each case no later than immediately prior to the beginning of the special meeting.

 

If you have instructed a broker or bank to vote your shares, you must follow directions received from your broker or bank to change those instructions.

 

Participants in the Pactiv Corporation 401(k) Savings and Investment Plan or the Pactiv Hourly 401(k) Savings and Investment Plan who wish to revoke their voting instructions to the plan trustee must contact the applicable plan trustee and follow its procedures.

 

 

After careful consideration, our board of directors has unanimously approved the merger agreement and determined that the merger agreement and the merger are advisable, fair to and in the best interests of Pactiv and its stockholders. Our board of directors recommends that Pactiv stockholders vote “FOR” the proposal to adopt the merger agreement and approve the transactions contemplated thereby and also recommends that stockholders vote “FOR” adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes in favor of adopting the merger agreement and approving the transactions contemplated thereby at the time of the special meeting.

 

 

The expense of soliciting proxies in the enclosed form will be borne by Pactiv. We have retained Georgeson Inc., a proxy solicitation firm, to solicit proxies in connection with the special meeting at a cost of approximately $20,000 plus expenses. In addition, we may reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by certain of our directors, officers and employees, personally or by telephone, facsimile or other means of communication. No additional compensation will be paid for such services.

 

 

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement may have been sent to multiple stockholders in each household. We will promptly deliver a separate copy of either document to any stockholder upon written or oral request to Pactiv Corporation, Investor Relations Department, 1900 West Field Court, Lake Forest, Illinois 60045, Telephone: (866) 456-5439, Email: investorrelations@pactiv.com. In addition, stockholders who share a single address but receive multiple copies of the proxy statement may request that in the future they receive a single copy by contacting us at the address, phone number and email address set forth in the prior sentence.

 

A list of our stockholders entitled to vote at the special meeting will be available for examination by any Pactiv stockholder at the special meeting. For ten days prior to the special meeting, this stockholder list will be available for inspection during ordinary business hours at our corporate offices located at 1900 West Field Court, Lake Forest, Illinois 60045.

 

Pactiv

 

We are a leading producer of consumer and foodservice/food packaging products. With one of the broadest product lines in the specialty packaging industry, we derive more than 80% of our sales from market sectors in which we hold the No. 1 or No. 2 market share position. Our business operates 47 manufacturing facilities in North America, and one in Germany. We also have two joint-venture interests in China. In 2009, 96% of our $3.4 billion in sales was generated in North America.

 

We have three reporting segments:

 

 

Our company was incorporated in the state of Delaware in 1965 under the name of Packaging Corporation of America, operating as a subsidiary of Tenneco Inc., or Tenneco. In November 1995, we changed our name to Tenneco Packaging Inc. In November 1999, we were spun-off from Tenneco as an independent company, and changed our name to Pactiv Corporation.

 

Our principal executive offices are located at 1900 West Field Court, Lake Forest, Illinois 60045. Our telephone number is (847) 482-2000. Our website is located at http://www.pactiv.com . Additional information regarding Pactiv is contained in our filings with the SEC. See “Where You Can Find More Information.”

 

Rank Group Limited

 

Rank Group is a private company headquartered in New Zealand that is wholly owned by Mr. Graeme Hart. It and its affiliates owned by Mr. Hart own businesses engaged in packaging (in particular beverage packaging), consumer products and building supplies.

 

Reynolds Group Holdings Limited

 

Reynolds, an affiliate of Rank Group, is a leading global manufacturer and supplier of consumer food and beverage packaging and storage products and operates through five primary segments: Reynolds Consumer, Reynolds Foodservice, SIG, Evergreen, and Closures.

 

Reynolds Acquisition Corporation

 

Reynolds Acquisition Corporation was formed as an indirect wholly owned subsidiary of Reynolds solely for the purpose of entering into the merger agreement with Pactiv and completing the merger. Sub has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement.

 

The executive offices of Rank Group, Reynolds and Sub are located at c/o Rank Group Limited, Level Nine, 148 Quay Street, P.O. Box 3515, Auckland, New Zealand. Their telephone number is +64 9 3666 259.

 

As part of the ongoing evaluation of our business, we consider a variety of strategic alternatives and have acquired various businesses over the years. In that regard, representatives of Pactiv have from time to time discussed potential business relationships with representatives of various companies in the consumer and foodservice/food packaging businesses that might expand our business, improve our competitive position and enhance stockholder value.

 

On February 9, 2010, representatives of a private equity firm we refer to as Party A telephoned Richard L. Wambold, President and Chief Executive Officer of Pactiv, inviting Mr. Wambold to meet with them to discuss unspecified topics. Party A is affiliated with a portfolio company in the packaging business.

 

On February 18, 2010, at a meeting of our board of directors, Mr. Wambold reported that he had been contacted by Party A and had scheduled a meeting with representatives of Party A at their request for early March 2010. Mr. Wambold also reported that he had heard a rumor that Party A was potentially interested in acquiring Pactiv.

 

On March 3, 2010, Mr. Wambold had a meeting with representatives of Party A who expressed an interest in making a proposal to acquire Pactiv and combining Pactiv with its portfolio company in the packaging business. Mr. Wambold contacted the members of our board of directors to report on Party A’s interest in Pactiv.

 

On March 17, 2010, Pactiv received a letter from Party A, indicating a preliminary interest in acquiring Pactiv at a proposed per share consideration of $30.50 in cash, subject to confirmatory due diligence, and outlining other terms, including the anticipated financing arrangements for an acquisition. The letter did not address any management retention, compensation or similar matters. Party A requested a period of exclusivity in which to conduct due diligence. Mr. Wambold contacted the members of our board of directors to inform them of the contents of the letter.

 

On March 25 and 26, 2010, our board of directors met with representatives of Credit Suisse Securities (USA) LLC, or Credit Suisse, its financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP, or Skadden, its legal advisor, and management, to discuss Party A, Party A’s proposal and its related portfolio company and Pactiv’s strategic plans and alternatives. A representative of Skadden reviewed with the board its fiduciary duties in assessing Party A’s proposal. Representatives of Credit Suisse discussed Party A, reviewed certain financial aspects of its proposal, reviewed preliminary financial materials regarding Pactiv, including preliminary valuation information, and discussed other relevant considerations. A representative of another investment banking firm that was interested in serving as a financial advisor to Pactiv also reviewed preliminary valuation information regarding Pactiv. The board decided not to retain such firm. After discussion, our board of directors concluded that the per share consideration proposed by Party A was not satisfactory and did not provide a basis for further discussions. The board directed Mr. Wambold to respond to Party A accordingly. The board directed that, in connection with any discussions with Party A or any other person, neither Mr. Wambold nor any member of management would have any discussions regarding management retention, compensation or similar matters without the prior consent of our board of directors. Mr. Wambold was to advise the other members of management of the board’s instructions and, after the meeting, he did so. The board reiterated its instructions prohibiting such discussions on several occasions, including at its meetings held on April 15, 2010, May 5, 2010, June 25, 2010 and August 8, 2010. Each time, Mr. Wambold confirmed that neither he nor any members of management had engaged in any such discussions with any potential acquiror. In addition, at the board’s request, a representative of Skadden attended the June 10, 2010 meeting between Mr. Wambold and representatives of Reynolds and the June 16, 2010 meeting between Mr. Wambold, Edward T. Walters, Senior Vice President and Chief Financial Officer of Pactiv, and representatives of Party A.

 

Following the March 25 and 26, 2010 board meetings, Mr. Wambold sent a letter to Party A informing it of the board’s decision that the per share consideration proposed by Party A did not provide a basis for further discussions. Representatives of Party A telephoned Mr. Wambold to discuss the board’s decision.

 

On April 13, 2010, Pactiv received a second letter from Party A, in which Party A increased its proposed per share consideration to $33.00 in cash, subject to confirmatory due diligence. Party A advised that the other terms

contained in its letter dated March 17, 2010 remained unchanged. Mr. Wambold contacted the members of our board of directors to inform them of the contents of the letter.

 

On April 15, 2010, our board of directors met with representatives of Credit Suisse and Skadden and management to discuss Party A’s revised proposal. Representatives of Credit Suisse reviewed certain financial aspects of Party A’s revised proposal, reviewed certain updated preliminary financial materials regarding Pactiv, including preliminary valuation information, and discussed other relevant considerations. After discussion, our board of directors concluded that the revised per share consideration did not reflect a value sufficient to engage in discussions with Party A and to provide it with non-public information as part of a due diligence process. The board directed Mr. Wambold to respond to Party A accordingly.

 

Following the April 15, 2010 board meeting, Mr. Wambold sent a letter to Party A informing it of the board’s decision. Representatives of Party A telephoned Mr. Wambold to discuss the board’s decision.

 

On May 3, 2010, Pactiv received a third letter from Party A, in which Party A increased its proposed per share consideration to $35.00 in cash, subject to confirmatory due diligence. Party A advised that the other terms contained in its letter dated March 17, 2010 remained unchanged. Representatives of Party A also telephoned Mr. Wambold to discuss the revised proposal. Mr. Wambold contacted the members of our board of directors to inform them of the contents of the letter.

 

On May 5, 2010, our board of directors met with representatives of Credit Suisse and Skadden and management to discuss the revised proposal received from Party A. Representatives of Credit Suisse discussed certain financial aspects of Party A’s revised proposal, discussed certain updated preliminary financial materials regarding Pactiv and discussed other relevant considerations. After discussion, the board met in executive session with a representative of Skadden who reviewed with the directors their legal duties and responsibilities and various legal considerations relating to the board’s evaluation and any decision to engage in discussions and a due diligence process with Party A. The directors discussed Party A’s proposal, forecasts of Pactiv’s future performance as a stand-alone entity prepared by management and financial materials regarding Pactiv previously prepared by Credit Suisse. After discussion, our board of directors concluded that Party A’s revised proposal offered the prospect of sufficient value to support further discussion with Party A. The board authorized management to provide customary business and financial due diligence information to Party A.

 

In mid-May 2010, representatives of Credit Suisse and Pactiv worked to set up an online data room that contained customary business and financial due diligence information about Pactiv. The online data room was established on May 21, 2010 and periodically updated thereafter.

 

On May 10, 2010, Party A executed a confidentiality and standstill agreement with Pactiv that did not contain exclusivity terms. The agreement provided that the standstill restrictions on Party A would terminate upon the occurrence of a number of events, including an announcement that Pactiv was considering a transaction, or had entered into an agreement, for the acquisition of a majority of the voting securities or assets of Pactiv with a party other than Party A or its affiliates. On May 21, 2010, Party A was granted access to the online data room and commenced a due diligence review of Pactiv.

 

On May 14, 2010, our board of directors met and Mr. Wambold reported on the status of discussions with Party A and its diligence process. The directors considered whether to establish a special committee and discussed, among other things, the fact that seven of the eight board members are non-management directors and are considered independent under the rules of the SEC and NYSE and under the definition of independence in Pactiv’s Corporate Governance Guidelines. Our board of directors concluded there was no need to establish such a committee.

 

On May 17, 2010, an article was published in the Wall Street Journal reporting that a private equity firm was in talks to acquire Pactiv but that the potential value of such a transaction could not be learned. The closing price of our common stock on May 17, 2010 was $28.44, an increase of approximately 19% over the closing price of our common stock on May 14, 2010, the last trading day prior to publication of the article. On May 19, 2010, another article was published in the Wall Street Journal , identifying two additional parties that were reported to be interested in potentially acquiring Pactiv. Pactiv did not comment publicly in response to these stories or subsequent rumors about a potential acquisition.

Between May 17 and May 21, 2010, following the Wall Street Journal articles regarding the potential sale of Pactiv and other similar media reports, five financial parties and three strategic parties in the packaging business, including Reynolds, contacted Mr. Wambold and representatives of Credit Suisse regarding their interest in possibly acquiring Pactiv.

 

On May 25, 2010, Rank Group executed a confidentiality and standstill agreement with Pactiv. The agreement provided that the standstill restrictions on Rank Group would terminate upon the occurrence of a number of events, including an announcement that Pactiv was considering a transaction, or had entered into an agreement, for the acquisition of a majority of the voting securities or assets of Pactiv with a party other than Rank Group or its affiliates. Reynolds was granted access to the online data room on June 1, 2010 and commenced a due diligence review of Pactiv.

 

On May 27, 2010, representatives of Pactiv made a presentation to representatives of Party A regarding the business, prospects and financial condition of Pactiv. Representatives of Credit Suisse were also in attendance.

 

On May 27, 2010, our board of directors met with representatives of Credit Suisse and Skadden and management to discuss the recent inquiries received regarding the possible acquisition of Pactiv. At the meeting, representatives of Credit Suisse reviewed with the board the parties that had made the inquiries, a proposed process and timeline for evaluating and potentially responding to the inquiries and recent adverse developments in the debt financing markets. After discussion, our board of directors determined that it needed additional information from the parties, including a preliminary indication of value, in order to evaluate and respond to their inquiries. The board directed Joseph E. Doyle, Vice President, General Counsel and Secretary of Pactiv, to send letters to each party requesting such information. In light of Party A’s letter dated May 3, 2010, which included a preliminary indication of value, the board did not direct Mr. Doyle to send a letter to Party A.

 

On May 28, 2010, Mr. Doyle sent letters to the eight parties that had contacted Pactiv as directed by the board, asking for written confirmation of interest and certain information by June 4, 2010.

 

Beginning on May 31, 2010 and continuing through the first week of June 2010, three parties provided written indications of interest in acquiring Pactiv. Reynolds indicated it would expect to submit a bid with a per share price in the mid-$30 range and a private equity firm we refer to as Party B indicated that it would expect to submit a bid with a per share price of $35.00. Party B is affiliated with a portfolio company in the packaging business. A strategic party in the packaging business submitted the third written indication of interest, which was withdrawn prior to our June 5, 2010 board meeting, and did not include a proposed per share consideration. Of the remaining five parties, two indicated they could not provide a preliminary value or value range without performing due diligence on Pactiv, one indicated an interest in a strategic transaction not involving the acquisition of Pactiv, one indicated that it was not interested in acquiring Pactiv and one did not provide a response. Over the course of the week, representatives of Credit Suisse and Mr. Wambold had telephone conversations with several of these parties to discuss their submissions and gauge their interest in acquiring Pactiv. During this time, the board was updated through regular communications from Mr. Wambold.

 

On June 1, 2010, representatives of Pactiv made a presentation to representatives of Reynolds regarding the business, prospects and financial condition of Pactiv. Representatives of Credit Suisse were also in attendance.

 

On June 5, 2010, our board of directors met with representatives of Credit Suisse and Skadden and management to discuss the responses to Pactiv’s request for written confirmations of interest. At the meeting, representatives of Credit Suisse reviewed with the board the parties who had responded, outlined the responses and provided an update on recent developments in the debt financing markets, including with respect to the deterioration that had taken place in the debt financing markets and the difficult financing environment. The board discussed the low level of interest in exploring a potential transaction evidenced by the two parties who had indicated that they could not provide a preliminary value or value range prior to performing due diligence on Pactiv. Mr. Wambold updated the board on the on-going diligence review of Pactiv by Party A and Reynolds. After discussion, our board of directors directed management to enter into a confidentiality and standstill agreement with Party B and to facilitate Party B’s diligence review of Pactiv.

On June 9, 2010, representatives of Pactiv made a second, more detailed presentation to representatives of Party A regarding the business, prospects and financial condition of Pactiv. Representatives of Credit Suisse were also in attendance.

 

On June 10, 2010, representatives of Pactiv made a second, more detailed presentation to representatives of Reynolds regarding the business, prospects and financial condition of Pactiv. Representatives of Credit Suisse were also in attendance. Following the presentation, Mr. Wambold met with representatives of Reynolds to discuss Reynolds’ on-going diligence. A representative of Skadden was also in attendance.

 

On June 10, 2010, Party B executed a confidentiality and standstill agreement with Pactiv. The agreement provided that the standstill restrictions on Party B would terminate upon the occurrence of a number of events, including an announcement that Pactiv was considering a transaction, or had entered into an agreement, for the acquisition of a majority of the voting securities or assets of Pactiv with a party other than Party B or its affiliates. Party B was granted access to the online data room on June 11, 2010 and commenced a due diligence review of Pactiv.

 

In the course of their discussions with Mr. Wambold in May 2010, each of Party A and Reynolds had described its prior relationships with Credit Suisse and requested that Pactiv consent to Credit Suisse being available to provide financing to each of them to support an acquisition proposal. Following discussions with our board of directors, including with respect to the retention of Perella Weinberg as an additional financial advisor to the board, Pactiv’s long-standing relationship with Credit Suisse, Credit Suisse’s familiarity with Pactiv and its business and the value the board ascribed to the advice and analysis provided by Credit Suisse, Pactiv gave its consent to Credit Suisse performing such a role for Party A and Reynolds, as well as providing financing to each of the other interested parties who provided written indications of interest.

 

On June 11, 2010, after requesting proposals from three potential additional financial advisors, our board of directors engaged Perella Weinberg to act as its financial advisor in connection with a potential transaction (as subsequently confirmed in writing in a letter dated June 15, 2010). Perella Weinberg was retained to provide the board with independent financial analysis and assistance in connection with any potential transaction and, if requested, a fairness opinion regarding such a transaction. On the same day, representatives of Pactiv made a presentation to Perella Weinberg regarding the business, prospects and financial condition of Pactiv.

 

On June 16, 2010, Mr. Wambold and Mr. Walters met with representatives of Party A to discuss its on-going diligence. A representative of Skadden was also in attendance.

 

On June 18, 2010, representatives of Pactiv made a presentation to representatives of Party B regarding the business, prospects and financial condition of Pactiv. Representatives of Credit Suisse and Perella Weinberg were also in attendance.

 

On June 25, 2010, our board of directors met with representatives of Credit Suisse, Perella Weinberg and Skadden and management and received an update on the on-going diligence review of Pactiv by Reynolds, Party A and Party B. Mr. Wambold reported on his meetings with representatives of Reynolds and Party A. Representatives of Credit Suisse stated that it was unlikely that any party with an interest in acquiring Pactiv and the financial means to do so had not contacted Pactiv given the articles published in the Wall Street Journal . After discussion, the board concluded that there were no additional parties that should be contacted about making an offer to acquire Pactiv.

 

On July 7, 2010, our board of directors met with representatives of Credit Suisse, Perella Weinberg and Skadden and management and received an update on the on-going diligence review of Pactiv by Reynolds, Party A and Party B. Representatives of Credit Suisse outlined a potential timeline for completing the diligence process and submitting formal bids. Representatives of Perella Weinberg reviewed preliminary financial analyses of Pactiv, including a valuation summary. After discussion, the board directed Credit Suisse to send letters to Reynolds, Party A and Party B requesting definitive proposals with committed financing when the due diligence process was substantially complete.

 

On July 12, 2010, Party B notified a representative of Credit Suisse that it was no longer interested in acquiring Pactiv because it was primarily focused on another acquisition opportunity and withdrew from the process. Mr. Wambold contacted the members of our board of directors to inform them of the development.

 

During July 2010, representatives of Reynolds, Party A and their respective financing sources continued to conduct additional due diligence on Pactiv, including the review of materials in the online data room and diligence calls with management and Pactiv’s advisors, Perella Weinberg, Credit Suisse, Skadden, Ernst & Young LLP, Deloitte & Touche LLP and Hewitt Associates, Inc.

 

On July 26, 2010, management concluded that the due diligence process was substantially complete and directed Credit Suisse to send Party A and Reynolds a proposed form of merger agreement prepared by Skadden and a letter setting forth the process to submit formal bids and requesting definitive cash proposals with committed financing. Responses originally were requested by August 5, 2010 but the deadline was extended to August 6, 2010 to allow the parties to complete their final due diligence review of Pactiv.

 

On August 6, 2010, Pactiv received from Party A two proposals to negotiate instead of a formal bid in accordance with the terms of Pactiv’s letter dated July 26, 2010. Party A’s proposals did not include a markup of the proposed merger agreement or executed commitment letters. Rather, Party A outlined two possible transactions. Under the first scenario, which was subject to a financing contingency, a portfolio company of Party A in the packaging business would acquire Pactiv for a per share price of $35.00 in cash and, in the event it could not secure debt financing in accordance with certain terms specified by Party A, the portfolio company would have the right to replace up to $5.00 of the cash per share consideration with an equivalent amount of ten year senior unsecured notes bearing a 13.00% interest rate. If the portfolio company was unable to successfully obtain debt financing, it would pay a $100 million termination fee to Pactiv. Under the second scenario, Party A proposed that Pactiv acquire its portfolio company in a stock-for-stock merger in which existing stockholders of the portfolio company would own approximately 22% of the combined company.

 

On August 6, 2010, Pactiv also received a formal bid from Reynolds, which included a markup of the proposed merger agreement and executed equity and debt commitment letters. Reynolds proposed a per share price of $33.00 in cash. Reynolds advised Pactiv that its offer would expire if Pactiv did not execute an exclusivity agreement by August 10, 2010.

 

Representatives of Credit Suisse, Perella Weinberg and Skadden and management reviewed the materials submitted by Party A and Reynolds. Representatives of Skadden prepared a summary of the responses, which was provided to the board prior to its August 8, 2010 meeting.

 

On August 8, 2010, our board of directors met with representatives of Perella Weinberg and Skadden and management to discuss the responses from Party A and Reynolds. Representatives of Perella Weinberg and Skadden and management reviewed a preliminary analysis of the responses, including key financial and legal terms and conditions. The board expressed its concerns regarding Party A’s proposals, including the significant risks associated with Party A’s inability to date to secure committed debt financing satisfactory to Party A and the financing contingency outlined in Party A’s first scenario. The board noted that Party A had been actively engaged in an extensive due diligence review of Pactiv since early May 2010 and had contacted numerous financial institutions to arrange committed financing. Further, the board noted that without a mark-up of the proposed merger agreement, it could not compare Party A’s views on risk allocation, certainty of closing and other transaction terms with those presented in the formal bid submitted by Reynolds. Mr. Wambold expressed his view that, after discussing a review and analysis of the proposal with Pactiv management, Pactiv’s acquisition of Party A’s portfolio company in a stock-for-stock merger, as outlined in Party A’s second scenario, was not attractive to Pactiv in light of the portfolio company’s high levels of debt and its business portfolio. The board concurred. Pactiv’s financial advisors did not prepare preliminary financial analyses with respect to the proposed stock-for-stock merger. Representatives of Perella Weinberg then reviewed updated preliminary financial analyses of Pactiv, including a valuation summary, and management and the board discussed Pactiv’s long term prospects as a stand-alone company. After further discussion, the board determined it would pursue Reynolds’ formal bid and authorized Mr. Wambold to engage in discussions with Reynolds regarding certain transaction terms, including with respect to antitrust matters and the definition of material adverse effect in the proposed merger agreement, to indicate to Reynolds that the board wanted a per share consideration of $34.00, and to obtain information to better understand, and try to improve the terms of, Reynolds’ proposed financing for the transaction. Representatives of Credit Suisse then joined the board meeting. The debt financing commitments provided by Reynolds indicated that Credit Suisse was the lead bank for the debt commitment. Representatives of Credit Suisse reported that Credit Suisse expected to

receive fees from Reynolds if Reynolds acquired Pactiv that Credit Suisse believed would be customary and market based and appropriate for similar commitments and risks taken on by Credit Suisse given the prevailing market conditions at the time and the volatility in the financial markets. Representatives of Credit Suisse then reviewed the potential impact that changes in certain liabilities of Pactiv may have had on Reynolds’ and Party A’s valuation of Pactiv, recent developments in the debt financing markets, including with respect to increased borrowing costs, particularly in the leveraged loan market, the potential debt and equity financing that could reasonably be expected to be required for Reynolds or Party A to consummate the acquisition of Pactiv and the ability of Reynolds and Party A to finance such a transaction.

 

On August 9, 2010, Mr. Wambold telephoned Mr. Graeme Hart, the owner of Rank Group, to discuss a number of issues, including the consideration to be paid to Pactiv stockholders in the proposed transaction. During the conversation, Mr. Wambold stated that our board of directors wanted a per share consideration of $34.00. After discussion, Mr. Hart agreed to increase the per share consideration to $33.25 and indicated that such offer was his best and final. Mr. Hart also agreed to increase the amount of Rank Group’s equity commitment to Reynolds in support of the acquisition financing and to extend the deadline for executing the exclusivity agreement to August 11, 2010.

 

On August 9, 2010, our board of directors met with representatives of Perella Weinberg and Skadden and management to receive a report on Mr. Wambold’s discussions with Mr. Hart. After discussion, the board directed Mr. Wambold to execute an exclusivity agreement with Reynolds and authorized management to negotiate the terms of the merger agreement and commitment letters consistent with the discussion at the meeting.

 

On August 11, 2010, Pactiv and Reynolds executed an exclusivity agreement with an August 25, 2010 expiration date and Skadden delivered a revised draft of the merger agreement to representatives of Reynolds’ legal advisor, Debevoise & Plimpton LLP. Pactiv and Reynolds and their respective advisors began negotiating the terms of the merger agreement and the commitment letters. Negotiations continued from August 11, 2010 through August 16, 2010.

 

On August 15, 2010, our board of directors met to consider the proposed merger agreement. Representatives from Skadden reviewed the board’s fiduciary duties and outlined in detail the principal terms of the merger agreement and Reynolds’ equity and debt financing commitments. Skadden also described the few open issues that remained to be resolved. Representatives of Credit Suisse provided an overview of Rank Group and Reynolds as well as a review of Reynolds’ current outstanding debt. Representatives of Credit Suisse also discussed the revised equity and debt financing commitments and described the increased amount of the equity commitment to Reynolds from Rank Group. Perella Weinberg presented its financial analyses of Pactiv and delivered its oral opinion, which was confirmed by delivery of a written opinion dated August 15, 2010, to the effect that, as of that date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in such opinion, the $33.25 cash per share merger consideration to be received by holders of shares of Pactiv common stock (other than the Reynolds Affiliates) in the merger was fair, from a financial point of view, to such holders, as more fully described under the caption “The Merger — Opinion of Perella Weinberg, Financial Advisor to the Board of Directors of Pactiv” on page 28. Following extended discussion, our board of directors unanimously declared that the merger agreement and the merger with Reynolds were advisable, fair to and in the best interests of Pactiv’s stockholders. The board approved the merger agreement (with management directed to negotiate an acceptable resolution of the open issues) and the merger with Reynolds in accordance with Delaware law and recommended that Pactiv stockholders adopt the merger agreement. Our board of directors authorized the appropriate officers of Pactiv to finalize, execute and deliver the merger agreement and related documents.

 

Following the meeting of our board of directors, representatives of Pactiv and Reynolds and their advisors finalized the documentation for the transaction. After the close of trading on the NYSE on August 16, 2010, the merger agreement was executed and each of Pactiv and Reynolds issued separate press releases announcing the agreement prior to the opening of trading on the NYSE on August 17, 2010.

 

Our board of directors recommends that you vote “FOR” adoption of the merger agreement and approval of the transactions contemplated thereby and “FOR” adjournment of the special meeting, if

necessary or appropriate, to solicit additional proxies if there are not sufficient votes in favor of adopting the merger agreement and approving the transactions contemplated thereby at the time of the special meeting.

 

At a special meeting of our board of directors on August 15, 2010, after careful consideration, including consultation with financial and legal advisors, our board of directors unanimously determined that the merger agreement and the merger are advisable, fair to and in the best interests of Pactiv stockholders and approved the merger agreement. In the course of reaching its decision over several board meetings, our board of directors consulted with our senior management, financial advisors and legal counsel, reviewed a significant amount of information and considered a number of factors, including, among others, the following:

 

 

 

 

 

 

 

Our board of directors also considered potentially negative factors in its deliberations concerning the merger including, among others, the following:

 

 

During its consideration of the transaction with Reynolds, our board of directors was also aware that some of our directors and executive officers may have interests with respect to the merger, that are, or may be, different from, or in addition to those of Pactiv stockholders generally, as described in “The Merger — Interests of Pactiv’s Directors and Executive Officers in the Merger” beginning on 43.

 

While our board of directors considered potentially positive and potentially negative factors, our board of directors concluded that, overall, the potentially positive factors far outweighed the potentially negative factors.

 

In view of the variety of factors considered in connection with its evaluation of the merger, our board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation, including the financial analyses presented to our board of directors by Perella Weinberg and the opinion of Perella Weinberg described under the caption “The Merger — Opinion of Perella Weinberg, Financial Advisor to the Board of Directors of Pactiv” on page 28. In addition, individual directors may have given differing weights to different factors, including the financial analyses presented to our board of directors by Perella Weinberg and the opinion of Perella Weinberg described under the

caption “The Merger — Opinion of Perella Weinberg, Financial Advisor to the Board of Directors of Pactiv” on page 28.

 

Pactiv retained Perella Weinberg to act as financial advisor to its board of directors in connection with the proposed merger. The board of directors of Pactiv selected Perella Weinberg based on Perella Weinberg’s qualifications, expertise and reputation and its knowledge of the industries in which Pactiv conducts its business. Perella Weinberg, as part of its investment banking business, is continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, leveraged buyouts and other transactions as well as for corporate and other purposes.

 

On August 15, 2010, Perella Weinberg rendered its oral opinion, subsequently confirmed in writing, to the board of directors of Pactiv that, as of such date, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in the opinion, the $33.25 cash per share merger consideration to be received by holders of shares of Pactiv common stock (other than the Reynolds Affiliates) in the merger was fair, from a financial point of view, to such holders.

 

The full text of Perella Weinberg’s written opinion, dated August 15, 2010, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by Perella Weinberg, is attached as Annex B and is incorporated by reference herein. Holders of shares of Pactiv common stock are urged to read the opinion carefully and in its entirety. The opinion does not address Pactiv’s underlying business decision to enter into the merger or the relative merits of the merger as compared with any other strategic alternative which may have been available to Pactiv. The opinion does not constitute a recommendation to any holder of Pactiv common stock as to how such holder should vote or otherwise act with respect to the merger or any other matter. In addition, Perella Weinberg expressed no opinion as to the fairness of the merger to, or any consideration to, the holders of any other class of securities, creditors or other constituencies of Pactiv. Perella Weinberg provided its opinion for the information and assistance of the board of directors of Pactiv in connection with, and for the purposes of its evaluation of, the merger. This summary is qualified in its entirety by reference to the full text of the opinion.

 

In arriving at its opinion, Perella Weinberg, among other things:

 

 

 

In arriving at its opinion, Perella Weinberg assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information supplied or otherwise made available to it (including information that was available from generally recognized public sources) for purposes of its opinion and further relied upon the assurances of the management of Pactiv that information furnished by them for purposes of Perella Weinberg’s analysis did not contain any material omissions or misstatements of material fact. With respect to the Financial Forecasts prepared by Pactiv’s management, Perella Weinberg was advised by the management of Pactiv, and assumed, with the consent of the board of directors of Pactiv, that the such forecasts had been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Pactiv as to the future financial performance of Pactiv and the other matters covered thereby, and Perella Weinberg expressed no view as to the assumptions on which they were based. In arriving at its opinion, Perella Weinberg did not make any independent valuation or appraisal of the assets or liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Pactiv, nor was it furnished with any such valuations or appraisals, nor did it assume any obligation to conduct, nor did it conduct, any physical inspection of the properties or facilities of Pactiv. With respect to the pension plan and other post-employment benefit liabilities, Perella Weinberg, at the direction of the board of directors of Pactiv, relied on calculations provided to it by management of Pactiv and did not make any independent evaluation thereof, nor was Perella Weinberg furnished with any actuarial report related thereto. In addition, Perella Weinberg did not evaluate the solvency of any party to the merger agreement under any state or federal laws relating to bankruptcy, insolvency or similar matters. Perella Weinberg assumed that the final executed merger agreement would not differ in any material respect from the draft merger agreement reviewed by it and that the merger would be consummated in accordance with the terms set forth in the draft merger agreement reviewed by it, without material modification, waiver or delay. Perella Weinberg relied as to all legal matters relevant to rendering its opinion upon the advice of counsel.

 

Perella Weinberg’s opinion addressed only the fairness from a financial point of view, as of the date thereof, of the $33.25 cash per share merger consideration to be received by the holders of shares of Pactiv common stock (other than the Reynolds Affiliates) pursuant to the merger agreement. Perella Weinberg was not asked to, nor did it, offer any opinion as to any other term of the merger agreement or the form of the merger or the likely timeframe in which the merger would be consummated. In addition, Perella Weinberg expressed no opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the $33.25 cash per share merger consideration to be received by the holders of shares of Pactiv common stock pursuant to the merger agreement or otherwise. Perella Weinberg did not express any opinion as to any tax or other consequences that may result from the transactions contemplated by the merger agreement, nor did its opinion address any legal, tax, regulatory or accounting matters, as to which it understood Pactiv had received such advice as it deemed necessary from qualified professionals. Perella Weinberg was not authorized to solicit, and did not solicit, indications of interest in a transaction with Pactiv from any party, although Perella Weinberg understood that another financial advisor to Pactiv had solicited indications of interest in such a transaction from other parties. Except as described above, the board of directors of Pactiv imposed no other limitations on the investigations made or procedures followed by Perella Weinberg in rendering its opinion.

 

Perella Weinberg’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Perella Weinberg as of, the date of its opinion. It should be understood that subsequent developments may affect Perella Weinberg’s opinion, and Perella Weinberg does not have any obligation to update, revise, or reaffirm its opinion. The issuance of Perella Weinberg’s opinion was approved by an authorized committee of Perella Weinberg.

 

Summary of Material Financial Analyses

 

The following is a brief summary of the material financial analyses performed by Perella Weinberg and reviewed by the board of directors of Pactiv in connection with Perella Weinberg’s opinion relating to the merger and does not purport to be a complete description of the financial analyses performed by Perella Weinberg. The order of analyses described below does not represent the relative importance or weight given to those analyses by Perella Weinberg. Some of the summaries of the financial analyses include information presented in tabular format.

In order to fully understand Perella Weinberg’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Perella Weinberg’s financial analyses.

 

Analysis of Implied Premia and Multiples.   Perella Weinberg calculated the implied premium represented by the $33.25 cash per share merger consideration to be received by the holders of shares of Pactiv common stock in the merger relative to the following:

 

 

The results of these calculations are summarized in the following table:

 

 

In the analysis of implied multiples, Perella Weinberg first derived the implied enterprise value of Pactiv based on the $33.25 cash per share merger consideration to be received by the holders of shares of Pactiv common stock in the merger. Enterprise value for Pactiv was calculated as the aggregate value of Pactiv’s fully diluted equity (based on the total number of fully diluted outstanding shares of Pactiv common stock and the $33.25 cash per share merger consideration) plus debt at book value and noncontrolling interests at book value, less cash and cash equivalents as provided by Pactiv management. Perella Weinberg also reviewed historical and estimated earnings before interest, taxes, depreciation and amortization, or EBITDA, for Pactiv for certain periods described below. As Pactiv’s underfunded pension and other post-employment benefit liabilities are higher, relative to other companies reviewed in the Selected Publicly Traded Companies Analysis described below, Perella Weinberg adjusted enterprise value for Pactiv. Adjusted enterprise value for Pactiv was calculated as enterprise value, based on the $33.25 cash per share merger consideration to be received by the holders of shares of Pactiv common stock in the merger, plus an adjustment of $675 million based on the sum of (i) $964 million in under-funded pension plan liabilities as of July 20, 2010, tax effected at a 37% tax rate and (ii) $68 million in unfunded post-employment benefit liabilities for Pactiv, based on calculations of such liabilities prepared by Pactiv management (or (i) and (ii), collectively, the Pension Liability Adjustments). Perella Weinberg also derived adjusted EBITDA for Pactiv, which was calculated as EBITDA for the applicable period, less net periodic benefit income (net of service costs) (or, the Pension Income Adjustments) based on calculations of such income included in the Financial Forecasts prepared by Pactiv management.

In this analysis, Perella Weinberg calculated the following multiples of historical and estimated financial results for Pactiv:

 

 

The results of these analyses are summarized in the following table:

 

 

Historical Stock Trading.   Perella Weinberg reviewed the historical trading price per share of Pactiv common stock for the 52-week period ending on the Reference Date, the date upon which news of a potential acquisition of Pactiv became public, and the historical trading price per share of Pactiv common stock for the period starting on May 15, 2010 and ending on August 12, 2010. Perella Weinberg noted that the range of closing market prices per share of Pactiv common stock during the 52-week period ending on the Reference Date was $20.00 to $27.52 and that the range of closing market prices per share of Pactiv common stock during the period starting on May 15, 2010 and ending on August 12, 2010 was $27.58 to $31.54.

 

Equity Research Analyst Price Target Statistics.   Perella Weinberg reviewed and analyzed the most recent publicly available research analyst price targets for shares of Pactiv common stock prepared and published by selected equity research analysts prior to the Reference Date, and during the period starting on May 15, 2010 and ending on August 12, 2010. As the general convention of Wall Street equity research analysts is to provide 12-month price targets, Perella Weinberg discounted such research analyst price targets for shares of Pactiv common stock to August 12, 2010 using an assumed cost of equity of 9.4%. The assumed cost of equity was derived utilizing the Capital Asset Pricing Model, or CAPM. Perella Weinberg noted that the range of discounted equity analyst price targets for shares of Pactiv common stock prior to the Reference Date was $24.67 to $31.07 per share. Perella Weinberg also noted that the range of discounted equity analyst price targets for shares of Pactiv common stock during the period starting on May 15, 2010 and ending on August 12, 2010 was $26.50 to $31.98.

 

The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for shares of Pactiv common stock and these estimates are subject to uncertainties, including the future financial performance of Pactiv and future financial market conditions.

 

Selected Publicly Traded Companies Analysis.   Perella Weinberg reviewed and compared certain financial information for Pactiv to corresponding financial information, ratios and public market multiples for the following publicly traded companies in the packaging and consumer products industries, which, in the exercise of its professional judgment and based on its knowledge of such industries, Perella Weinberg determined to be relevant to its analysis. Although none of the following companies is identical to Pactiv, Perella Weinberg selected these companies because they had publicly traded equity securities and were deemed to be similar to Pactiv in one or more respects including the nature of their business, size, financial performance and geographic concentration.

 

 

For each of the selected companies, Perella Weinberg calculated and compared financial information and various financial market multiples and ratios based on the closing price per share as of August 12, 2010, SEC filings for historical information and third-party research estimates from FactSet for forecasted information. For Pactiv, Perella Weinberg made calculations based on the closing market price per share of Pactiv common stock on the Reference Date and the $33.25 cash per share merger consideration, and utilized the Financial Forecasts prepared by Pactiv management and third-party research estimates from FactSet for forecasted information.

 

With respect to Pactiv and each of the selected companies, Perella Weinberg reviewed adjusted enterprise value as a multiple of estimated adjusted EBITDA for each of calendar years 2010 and 2011. The results of these analyses are summarized in the following table:

 

 

Although the selected companies were used for comparison purposes, no business of any selected company was either identical or directly comparable to Pactiv’s business. Accordingly, Perella Weinberg’s comparison of selected companies to Pactiv and analysis of the results of such comparisons was not purely mathematical, but instead necessarily involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the relative values of the selected companies and Pactiv.

 

Present Value of Illustrative Future Stock Price Analysis.   Perella Weinberg performed an illustrative analysis of the implied present value of the future price per share of Pactiv common stock, which is designed to provide an indication of the present value of a theoretical future value of Pactiv common stock, assuming such future share price is derived from Pactiv’s estimated adjusted EBITDA and an assumed adjusted enterprise value to estimated adjusted EBITDA multiple. For this analysis, Perella Weinberg used financial information from the Recessionary Case Forecasts, Base Case Forecasts and Recovery Case Forecasts in the Financial Forecasts prepared by Pactiv management for each of the calendar years 2010 to 2014, and assumed that the pre-tax pension deficit and other post-employment benefit liability, as provided by Pactiv management, stay constant at current levels. Perella Weinberg first calculated the implied values per share of Pactiv common stock at the end of each of the calendar years 2010 to 2013 based on applying multiples of adjusted enterprise value to next twelve months adjusted EBITDA of 6.5x to 8.5x to adjusted EBITDA estimates for the Recessionary Case Forecasts, Base Case Forecasts and Recovery Case Forecasts in the Financial Forecasts for each of the calendar years 2011 to 2014. The 6.5x to 8.5x multiple range was generally consistent with the adjusted enterprise value to adjusted EBITDA multiples at which Pactiv common stock had traded over the past three years. Perella Weinberg then, for each case, discounted the 2010

to 2013 year-end implied per share values back to June 30, 2010 using an assumed cost of equity of 9.4%, which resulted in the following ranges of implied present values per share of Pactiv common stock:

 

 

The implied present value of future prices per share of Pactiv common stock was reviewed for illustrative purposes only. The illustrative future prices per share of Pactiv common stock should not be viewed as an accurate representation of what actual prices per share of Pactiv common stock will be. Actual prices per share of Pactiv common stock for any period may be greater or less than the illustrative future prices per share of Pactiv common stock reviewed by Perella Weinberg, and the differences may be material. Future share prices are inherently uncertain, being based upon numerous factors or events that are not possible to predict.

 

Discounted Cash Flow Analysis.   Perella Weinberg conducted a discounted cash flow analysis for Pactiv to calculate the present value as of June 30, 2010 of the estimated standalone unlevered free cash flows that Pactiv could generate during the period commencing in the second half of calendar year 2010 through calendar year 2014. Estimates of unlevered free cash flows used for this analysis were derived from each of the Recessionary Case Forecasts, Base Case Forecasts and Recovery Case Forecasts of the Financial Forecasts prepared by Pactiv management, treated stock-based compensation as a cash expense and were calculated based on customary methods. Perella Weinberg also calculated a range of terminal values assuming terminal year multiples of next twelve months adjusted EBITDA ranging from 6.5x to 8.5x. For each case based on the Financial Forecasts, Perella Weinberg used discount rates ranging from 7.5% to 8.5% based on estimates of the weighted average cost of capital of Pactiv. Perella Weinberg estimated Pactiv’s weighted average cost of capital by calculating the weighted average of Pactiv’s cost of equity (derived utilizing CAPM) and Pactiv’s after-tax cost of debt (taking into account the yield to maturity on Pactiv’s outstanding debt). The present values of unlevered free cash flows generated over the period described above were then added to the present values of terminal values resulting in a range of implied adjusted enterprise values for Pactiv. For each such range of implied adjusted enterprise values, Perella Weinberg derived ranges of implied equity values for Pactiv by subtracting the Pension Liability Adjustments, debt at book value of $1,483 million and noncontrolling interests at book value of $12 million and by adding cash and cash equivalents of $43 million. The debt, noncontrolling interests and cash and cash equivalents balances utilized in the analysis were as of June 30, 2010 as reported in Pactiv’s Form 10-Q for the quarterly period ended June 30, 2010. These analyses resulted in the following reference ranges of implied equity values per share of Pactiv common stock:

 

Selected Transactions Analysis.   Perella Weinberg analyzed certain information relating to selected precedent transactions with cash consideration in the packaging and food service products industries from February 1998 to August 12, 2010 which, in the exercise of its professional judgment, Perella Weinberg determined to involve relevant public companies with operations comparable to Pactiv. The selected transactions analyzed were the following:

 

 

 

 

For each of the selected transactions, Perella Weinberg calculated and compared the resulting enterprise value in the transaction as a multiple of LTM EBITDA (as adjusted from GAAP to exclude certain non-recurring expenses). Such multiples for the selected transactions were based on publicly available information at the time of the relevant transaction. Due to the limited financial disclosure available for most of the selected precedent transactions, Perella Weinberg did not calculate the multiple of adjusted enterprise value to adjusted EBITDA for each of the selected precedent transactions. The results of these analyses are summarized in the following table:

 

 

Perella Weinberg observed that, as discussed above under “Analysis of Implied Premia and Multiples,” (i) the implied enterprise value of Pactiv based on the $33.25 cash per share merger consideration as a multiple of LTM EBITDA, based on publicly available information, was 8.5x and (ii) the implied adjusted enterprise value of Pactiv based on the $33.25 cash per share merger consideration as a multiple of adjusted LTM EBITDA, based on publicly available information and the Pension Liability Adjustments and Pension Income Adjustments prepared by Pactiv management, was 10.3x.

 

Although the selected transactions were used for comparison purposes, none of the selected transactions nor the companies involved in them was either identical or directly comparable to the merger, Pactiv or Reynolds. In addition, in connection with its review, Perella Weinberg considered the dates on which these transactions were announced and the market conditions existing at such time. Accordingly, Perella Weinberg’s comparison of the selected transactions to the merger and analysis of the results of such comparisons were not purely mathematical, but instead necessarily involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the relative values of the companies involved in such transactions and of the merger and were based on Perella Weinberg’s experience working with corporations on various merger and acquisition transactions.

 

Illustrative Premiums Paid Analysis.   Perella Weinberg analyzed the premiums paid in the 17 acquisitions of United States companies since October 2008 with cash consideration and transaction values of $3 billion to $10 billion. For each of the 17 transactions, based on publicly available information, Perella Weinberg calculated the premiums of the offer price in the transaction to the target company’s closing stock price one day, one week and one month prior to the announcement of the transaction. Perella Weinberg observed that the median premiums to target company closing stock price one day, one week and one month prior to transaction announcement were 40.5%, 39.9% and 38.9%, respectively. Perella Weinberg observed that, as discussed above under “Analysis of Implied Premia and Multiples,” the implied premium represented by the $33.25 cash per share merger consideration to be received by the holders of shares of Pactiv common stock in the merger relative to $23.97, the closing market price per share of Pactiv common stock on the Reference Date, was 38.7%.

 

Miscellaneous

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth herein, without considering the analyses or the summary as a whole, could create an incomplete view of the processes underlying Perella Weinberg’s opinion. In arriving at its fairness determination, Perella Weinberg considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Rather, Perella Weinberg made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the analyses described herein as a comparison is directly comparable to Pactiv or the merger.

 

Perella Weinberg prepared the analyses described herein for purposes of providing its opinion to the board of directors of Pactiv as to the fairness, from a financial point of view, as of the date of such opinion, of the $33.25 cash per share merger consideration to be received by holders of shares of Pactiv common stock (other than the Reynolds Affiliates) in the merger. These analyses do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Perella Weinberg’s analyses were based in part upon the financial forecasts provided by Pactiv’s management and third party research analyst estimates, which are not necessarily

indicative of actual future results, and which may be significantly more or less favorable than suggested by Perella Weinberg’s analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties to the merger agreement or their respective advisors, none of Pactiv, Perella Weinberg or any other person assumes responsibility if future results are materially different from those forecasted by Pactiv management or third parties.

 

As described above, the opinion of Perella Weinberg to the board of directors of Pactiv was one of many factors taken into consideration by the board of directors of Pactiv in making its determination to approve the merger. Perella Weinberg was not asked to, and did not, recommend the specific consideration provided for in the merger agreement, which consideration was determined through negotiations between Pactiv and Reynolds.

 

Pursuant to the terms of the engagement letter between Perella Weinberg and Pactiv, Pactiv agreed to pay to Perella Weinberg a fee of $3 million upon Perella Weinberg’s delivery of its opinion. In addition, Pactiv agreed to reimburse Perella Weinberg for its reasonable expenses, including attorneys’ fees and disbursements and to indemnify Perella Weinberg and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

In the ordinary course of its business activities, Perella Weinberg or its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for their own account or the accounts of customers or clients, in debt or equity or other securities (or related derivative securities) or financial instruments (including bank loans or other obligations) of Pactiv or Reynolds or any of their respective affiliates. During the two year period prior to the date of Perella Weinberg’s opinion, no material relationship existed between Perella Weinberg and its affiliates and Pactiv, Reynolds or Rank Group pursuant to which compensation was received by Perella Weinberg or its affiliates; however Perella Weinberg and its affiliates may in the future provide investment banking and other financial services to Pactiv, Reynolds and Rank Group and their respective affiliates for which they would expect to receive compensation.

 

We anticipate that the total amount of funds necessary to complete the merger and the related transactions, including the funds needed to (i) pay our stockholders the amounts due under the merger agreement, (ii) refinance, repay or repurchase certain of our outstanding indebtedness and (iii) pay customary fees and expenses in connection with the transactions contemplated by the merger agreement will be approximately $5.7 billion.

 

Pactiv has been advised by Reynolds that on September 30, 2010, Reynolds entered into an amendment to its existing senior secured credit facility pursuant to which incremental lenders committed to provide incremental term loans in an aggregate principal amount equal to $2,020 million, to be funded on, or in escrow prior to, the closing date of the merger. The proceeds of such incremental term loans will be used to finance, in part, the acquisition, repay certain Pactiv indebtedness and pay associated transaction costs. Pactiv also has been advised by Reynolds that it intends to finance the merger and associated transaction costs with a revised capital structure consisting of a combination of $2,020 million aggregate principal amount of additional indebtedness under its existing senior secured credit facility, $1.5 billion of 7.125% Senior Secured Notes due 2019, $1.5 billion of 7.000% Senior Notes due 2019, and approximately $711 million of new equity and available cash. The closing of Reynolds’ notes offering is subject to customary closing conditions, some of which are beyond the control of Reynolds, and there is no guarantee that the offering will close in a timely manner, or at all.

 

Reynolds and certain of its affiliates have obtained equity and debt financing commitments described below in connection with the transactions contemplated by the merger agreement. Both the equity and debt financings are subject to certain conditions.

 

Equity Financing

 

Reynolds has received from Rank Group an equity commitment letter for an aggregate investment at closing of up to approximately $2 billion, which will constitute the equity portion of the financing for the transaction. Rank Group has agreed to furnish to Reynolds an amount of cash equal to the amount by which approximately $2 billion, reduced by the amount contributed by Rank Group (i) to any borrower of indebtedness contemplated by the debt

financing to enable it to fund any negative carry or like or other expenses associated with such indebtedness or (ii) to Reynolds to cure a default existing under any of its existing debt financings, exceeds the available cash on hand of Reynolds and Pactiv and their respective subsidiaries immediately prior to the merger.

 

Rank Group may be obligated to furnish funds from its equity commitment as a result of a reduction in the indebtedness available under the debt financing (described below) that is required in order for Reynolds to be in compliance on the closing date with any limitation on the occurrence of indebtedness under Reynolds’ existing debt financings.

 

The equity commitment is generally subject to (1) the satisfaction of the conditions to closing under the merger agreement, (2) the absence of modifications to the terms of the debt financing contemplated by the debt commitment letter described below, (3) the funding of such debt financing and (4) the consummation of the merger or Pactiv obtaining an order of specific performance requiring Reynolds to cause Rank Group to fund its commitment under the equity commitment letter and consummate the merger. The obligations of Rank Group under the equity commitment letter will terminate upon the earlier to occur of (i) the consummation of the merger (provided that Rank Group must provide the funding contemplated by the equity commitment letter in connection therewith) and (ii) the termination of the merger agreement.

 

Debt Financing

 

In connection with the execution and delivery of the merger agreement, Reynolds and certain of its affiliates have entered into a debt commitment letter, dated August 16, 2010, with CS, HSBC Bank and ANZ, which was subsequently amended on September 9, 2010 by a joinder entered into by Sumitomo and on September 10, 2010 by a joinder entered into with Rabobank. Under the debt commitment letter, CS, HSBC Bank, ANZ, Sumitomo and Rabobank have agreed to provide up to $5 billion in aggregate debt financing, subject to certain conditions and subject to adjustments, including to reflect (x) certain alternative debt financing (including certain of the debt incurred pursuant to the amendment to Reynolds’ existing senior secured credit facility) that may be incurred, and (y) any issuance of the notes described below prior to the consummation of the Merger. After giving effect to the adjustments resulting from the commitments to provide incremental term loans pursuant to the amendment to Reynolds’ existing senior secured credit facility, such debt commitments consist of (a) up to $1.5 billion in aggregate amount of secured bridge loans, reduced by the amount of any net proceeds that may be obtained from the issuance and sale by one or more affiliates of Reynolds of senior secured notes and (b) up to $1.5 billion in aggregate amount of unsecured bridge loans, reduced by the amount of any net proceeds that may be obtained from the issuance and sale by one or more affiliates of Reynolds of senior unsecured notes. The proceeds of the incremental term loans under the amendment to Reynolds’ existing senior secured credit facility and any such bridge loans and/or debt securities and alternative debt financing will be used to finance, in part, the payment of the merger consideration, the refinancing, repayment or repurchase of certain of our debt outstanding on the closing date of the merger and the payment of premiums, fees and expenses incurred in connection with such transactions.

 

The debt facilities contemplated by the debt commitment letter are subject to customary closing conditions, including, among others:

 

 

 

 

 

The incremental term loans contemplated by the amendment to Reynolds’ existing senior secured credit facility and Reynolds’ notes offering are each subject to closing conditions, which include certain of the above closing conditions.

 

Reynolds and Sub have agreed to use their (and Reynolds has agreed to cause Reynolds Group Holdings Inc. to use its) reasonable best efforts to obtain debt financing for the merger on the terms described in the debt commitment letter (as the same may be amended as contemplated by the merger agreement). If the debt financing becomes unavailable on the terms and conditions contemplated in the debt commitment letter, Reynolds and Sub have agreed to use their (and Reynolds has agreed to cause Reynolds Group Holdings, Inc. to use its) reasonable best efforts to obtain alternative financing from alternative sources on terms that are, in the aggregate, no more materially adverse to Pactiv, Reynolds or Sub.

 

The existence of any condition in the debt commitment letter, in the amendment to Reynolds’ existing senior secured credit facility or Reynolds’ notes offering does not constitute a condition to the obligation of Reynolds and Sub to effect the merger. We have agreed to reasonably cooperate in connection with the arrangement of the financing as may be reasonably requested by Reynolds. We will not be required to pay any commitment or other similar fee or incur any other liability or obligation in connection with the financing prior to the effective time of the merger for which we are not reimbursed or indemnified by the Reynolds.

 

Although the debt financing described in this proxy statement is not subject to due diligence or a “market out” provision (i.e., a provision allowing lenders not to fund their commitments if certain conditions in the financial markets prevail), such financing might not be funded on the closing date because of a failure to meet the closing conditions or for other reasons.

 

In connection with and to facilitate the financing for the transaction, Reynolds has requested that Pactiv undertake certain corporate restructurings and tax elections prior to the consummation of the Merger. Pactiv intends to comply with this request, and Reynolds has agreed to reimburse Pactiv for the related costs in the event that the Merger does not occur.

 

When considering the recommendation of our board of directors, you should be aware that the members of our board of directors and our executive officers have interests with respect to the merger, that are, or may be, different from, or in addition to those of Pactiv stockholders generally, pursuant to certain agreements between such directors and executive officers and Pactiv and certain company benefit plans. Our board of directors was aware of these additional interests, and considered them, when it approved the merger agreement.

 

Effect of Awards Outstanding Under our 2002 Incentive Compensation Plan

 

At the effective time of the merger, each outstanding option granted under our 2002 Incentive Compensation Plan or any other equity-based compensation plan of Pactiv, whether or not vested or exercisable, will be cancelled

and converted into the right to receive an amount in cash, without interest and less any applicable withholding tax, equal to the product of

 

 

The following table summarizes the vested options with exercise prices of less than $33.25 per share held by our directors and executive officers as of October 1, 2010, and the consideration that each of them will receive in connection with the cancellation of their options. None of our executive officers or directors holds any unvested options.

 

 

At the effective time of the merger, each outstanding restricted stock award granted under our 2002 Incentive Compensation Plan or any other equity-based compensation plan of Pactiv, will fully vest and such awards will be cancelled and converted into the right to receive the $33.25 per share in the same manner as shares of our common stock, with such payment to be subject to any applicable withholding tax. None of our directors or executive officers hold any shares of restricted stock.

 

Our executive officers will have their performance share awards cancelled in exchange for an amount in cash, without interest and less any applicable withholding tax, equal to the product of $33.25 and that number of shares determined as the sum of (x) with respect to any completed calendar year(s) or other measuring period(s) for the award, the number of shares notionally or conditionally vested by us for the portion of the award related to such year(s) or period(s) plus (y) with respect to any calendar year(s) or other measuring period(s) for which we have not allocated a notional or conditional number of shares (including the current and future years), the number of shares determined as if 100% of any performance targets or goals were achieved during such year(s) or period(s) and assuming satisfaction of all other conditions for receiving the target amount with respect to all such awards had been met.

 

The following table summarizes the estimated resulting consideration for performance share awards that each of our executive officers will receive pursuant to the merger agreement, assuming that the merger occurs as of November 15, 2010:

 

 

2010 Annual Bonuses

 

At the effective time of the merger, we will pay to each of our executive officers a minimum bonus equal to a pro rata portion (based on elapsed time through the effective time of the merger) of the cash payment that they would have received if 100% of any performance targets or goals for the 2010 calendar year were achieved and all other conditions for receiving payment were met. All bonus payments are subject to applicable tax withholding.

 

The following table summarizes the estimated 2010 annual bonus payment that each of our executive officers will receive pursuant to the merger agreement, assuming that the merger occurs as of November 15, 2010:

 

Deferred Compensation Plan and Deferred Retirement Savings Plan

 

Under the terms of our Deferred Compensation Plan, or DCP, and Deferred Retirement Savings Plan, or DRSP, in the event of a change in control (including consummation of the merger), participants will be entitled to a lump sum distribution of their account balances under such plans. The following table summarizes, as of October 1, 2010, the value of the account balances credited to each of our directors and executive officer under these plans (assuming for this purpose that, to the extent the credited amount is deemed invested in common stock equivalents, a value of $33.25 per share):

 

 

Supplemental Executive Retirement Plan

 

As of or prior to the effective time of the merger, we will terminate our Supplemental Executive Retirement Plan and pay to each executive officer his accrued benefit in a lump sum cash payment. The following table summarizes, as of December 1, 2010, the estimated value of the lump sum cash payment to each of our executive officer:

 

 

Amended and Restated Pactiv Corporation Change-in-Control Severance Benefit Plan for Key Executives

 

Our Amended and Restated Pactiv Corporation Change-in-Control Severance Benefit Plan for Key Executives, or CIC Plan, provides specified benefits to the executive officers if a change in control occurs and additional specified compensation and benefits if both (i) a change in control occurs, and (ii) we terminate the executive’s employment without “cause” or the executive resigns for “good reason” within two years after a change in control occurs. The consummation of the merger constitutes a change in control.

Benefits payable to our executive officers under the CIC Plan if a change in control occurs (but not a termination of employment) are as follows:

 

 

Benefits payable to our executive officers under the CIC Plan if both (i) a change in control occurs, and (ii) we terminate the executive’s employment without “cause” or the executive resigns for “good reason” within two years after a change in control occurs are as follows (provided that there will be no duplication of benefits provided under the terms of any of our compensation and benefit plans):

 

 

 

 

In addition, if the sum, or the combined amount, of the benefits payable under the CIC Plan and other payments or benefits to the executive officer would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), the combined amount will, unless the following sentence applies, be decreased by the smallest amount that will eliminate any “excess parachute payment” (as defined in Section 280G(b)(1) of the Code). If the decrease is 10% or more of the combined amount, the combined amount will not be decreased, but rather the executive officer will be entitled to an additional gross-up amount that, after payment of all taxes, is equal to any federal excise tax imposed under Section 4999 of the Code by reason of the benefits.

 

Estimated Value of Change in Control Benefits

 

The table below shows the estimated amount of potential benefits payable to our executive officers based on an assumed termination date of December 31, 2010 (assuming the termination date is after the change in control) and assuming the executive’s employment was terminated at that time by Pactiv other than for cause or by the executive for good reason. Certain of the payments (those made in respect of performance share awards and payments of the

2010 annual bonus) have already been quantified above. Moreover, certain of the payments and benefits noted in the table below (namely, the payment for the performance share awards) will be made merely by reason of completion of the merger and are not contingent upon a termination of employment.

 

These amounts are estimates only and do not necessarily reflect the actual amounts that will be paid to the executive following completion of the merger, or the actual costs of or value of health and welfare benefits or perquisites following completion of the merger, which will only be known if and when the individual becomes eligible for payment due to job termination after completion of the merger. Factors that affect the calculation of amounts payable under these agreements include date of completion of the merger; date of termination; interest rates then in effect; actual performance goal attainment levels; Internal Revenue Service regulations, including excise taxes imposed by Section 4999 of the Code; our costs of providing health care, insurance, financial counseling and outplacement services to terminated executives; and certain other assumptions used in the calculation.

 

Termination by Pactiv Other Than for Cause, Retirement or Disability,
Termination by the Executive for Good Reason Following a Change in Control
(assuming November 15, 2010 termination date)
(including amounts paid immediately upon a change in control)

 

 

 

 

 

Indemnification and Insurance

 

The merger agreement provides that Reynolds will cause the surviving corporation in the merger, and Reynolds and the surviving corporation agree, to indemnify the present and former directors and officers of Pactiv for acts and omissions occurring at or prior to the effective time to the fullest extent permitted by law, and Reynolds will cause the surviving corporation to promptly advance expenses as incurred to the fullest extent permitted by law.

 

The merger agreement also provides that, after the effective time, the surviving corporation will maintain in effect provisions in the surviving corporation’s organizational documents related to indemnification and advancement of expenses that were set forth in Pactiv’s organizational documents as of the date of the merger agreement. In addition, (i) Reynolds will cause to be maintained by the surviving corporation for a period of six years following the effective time the current directors’ and officers’ liability policies, or may substitute policies of substantially the same coverage containing terms and conditions that are no less advantageous to the insured or (ii) at Reynolds’ option, Reynolds may cause the surviving corporation to purchase at or after the effective time, or at Pactiv’s option (subject to Reynolds’ consent, which consent will not be unreasonably withheld), Pactiv may purchase prior to the effective time, a directors’ and officers’ liability “tail” insurance policy covering a period of six years following the effective time providing substantially equivalent benefits as the current policies maintained by Pactiv.

 

Post Merger Employment Arrangements

 

Reynolds has indicated a desire to retain senior management after the consummation of the merger. While preliminary discussion of general terms of employment have taken place between Reynolds and these managers, as of the date of this proxy statement, the parties have not reached agreement on any employment arrangements, nor have they entered into any employment agreements or similar contracts. Consummation of the merger is not conditioned on management entering into employment arrangements with Reynolds.

 

Holders of Pactiv common stock who dissent and do not approve the merger are entitled to certain appraisal rights under Delaware law in connection with the merger, as described below and in Annex C hereto. Such holders who perfect their appraisal rights and strictly follow certain procedures in the manner prescribed by Section 262 of the Delaware General Corporation Law, or DGCL, as in effect on the date the parties entered into the merger agreement, or Section 262 of the DGCL, will be entitled to receive payment of the fair value of their shares in cash from Pactiv, as the surviving corporation in the merger.

 

ANY PACTIV STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE HIS OR HER RIGHT TO DO SO SHOULD REVIEW ANNEX C CAREFULLY AND SHOULD CONSULT HIS OR HER LEGAL ADVISOR, SINCE FAILURE TO TIMELY COMPLY WITH THE PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH RIGHTS.

 

If a Pactiv stockholder has a beneficial interest in shares of Pactiv common stock that are held of record in the name of another person, such as a broker or nominee, and such Pactiv stockholder desires to perfect whatever appraisal rights such beneficial Pactiv stockholder may have, such beneficial Pactiv stockholder must act promptly to cause the holder of record timely and properly to follow the steps summarized below.

 

A VOTE IN FAVOR OF THE MERGER BY A PACTIV STOCKHOLDER WILL RESULT IN A WAIVER OF SUCH HOLDER’S RIGHT TO APPRAISAL RIGHTS.

 

When the merger becomes effective, Pactiv stockholders who strictly comply with the procedures prescribed in Section 262 of the DGCL will be entitled to a judicial appraisal of the fair value of their shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, and to receive payment of the fair value of their shares in cash from Pactiv, as the surviving corporation in the merger. The following is a brief summary of the statutory procedures that must be followed by a common stockholder of Pactiv in order to perfect appraisal rights under the DGCL. This summary is not intended to be complete and is qualified in its entirety by reference to Section 262 of the DGCL, the text of which is included as Annex C to this proxy statement. We advise any Pactiv stockholder considering demanding appraisal to consult legal counsel.

In order to exercise appraisal rights under Delaware law, a stockholder must be the stockholder of record of the shares of Pactiv common stock as to which Pactiv appraisal rights are to be exercised on the date that the written demand for appraisal described below is made, and the stockholder must continuously hold such shares through the effective date of the merger.

 

While Pactiv stockholders electing to exercise their appraisal rights under Section 262 of the DGCL are not required to vote against the approval of the merger, a vote in favor of approval of the merger will result in a waiver of the holder’s right to appraisal rights. Pactiv stockholders electing to demand the appraisal of such stockholder’s shares shall deliver to Pactiv, before the taking of the vote on the merger, a written demand for appraisal of such stockholder’s shares. Such demand will be sufficient if it reasonably informs Pactiv of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder’s shares. A proxy or vote against the merger will not constitute such a demand. Please see the discussion below under the heading “— Written Demands” for additional information regarding written demand requirements.

 

Within ten days after the effective time of the merger, Pactiv, as the surviving corporation, must provide notice of the date of effectiveness of the merger to all Pactiv stockholders who have not voted for approval of the merger agreement and who have otherwise complied with the requirements of Section 262 of the DGCL.

 

A record holder of shares of Pactiv common stock who elects to exercise appraisal rights with respect to the merger, or Dissenting Stockholder, must mail or deliver the written demand for appraisal to:

 

Pactiv Corporation
1900 West Field Court
Lake Forest, Illinois 60045
Telephone: (847) 482-2000
Attn: Investor Relations

 

Within 120 days after the effective date of the merger, any Dissenting Stockholder that has strictly complied with the procedures prescribed in Section 262 of the DGCL will be entitled, upon written request, to receive from Pactiv, as the surviving corporation, a statement of the aggregate number of shares not voted in favor of the merger and with respect to which demands for appraisal have been received by Pactiv, and the aggregate number of holders of those shares. This statement must be mailed to the Dissenting Stockholder within ten days after the Dissenting Stockholder’s written request has been received by Pactiv, as the surviving corporation, or within ten days after expiration of the period for delivery of demands for appraisal, whichever is later.

 

Within 120 days after the effective date of the merger, either Pactiv, as the surviving corporation, or any Dissenting Stockholder that has strictly complied with the procedures prescribed in Section 262 of the DGCL, may file a petition in the Delaware Court of Chancery, with a copy served on the surviving corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of each share of Pactiv stock of all Dissenting Stockholders. If a petition for an appraisal is timely filed by a stockholder and a copy of the petition is delivered to Pactiv, as the surviving corporation, the surviving corporation will then be obligated, within 20 days after receiving service, to provide the Delaware Court of Chancery with a duly verified list containing the names and addresses of any Dissenting Stockholders with whom agreements as to the value of their shares have not been reached.

 

After giving notice to the Dissenting Stockholders, the Delaware Court of Chancery will conduct a hearing upon the petition, and determine those stockholders that have complied with Section 262 of the DGCL and that have become entitled to appraisal rights. The Delaware Court of Chancery may require the Dissenting Stockholders to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; if any Dissenting Stockholder fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder.

 

After the Delaware Court of Chancery determines the stockholders entitled to an appraisal, the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding the Delaware Court of Chancery shall determine the fair value of the shares exclusive of any element of value arising from the accomplishment or

expectation of the merger, together with interest to be paid, if any, on the amount determined to be the fair value. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the day of payment of the judgment. When fair value is determined, the Delaware Court of Chancery will direct the payment of such value, with interest, if any, by the surviving corporation to the stockholders entitled to appraisal rights, upon surrender to the surviving corporation of the certificates representing those shares.

 

If no petition for appraisal is filed with the Delaware Court of Chancery by Pactiv, as the surviving corporation, or any Dissenting Stockholder within 120 days after the effective time of the merger, then the Dissenting Stockholders’ rights to appraisal will cease and they will be entitled only to receive merger consideration paid in the merger on the same basis as other Pactiv stockholders. Inasmuch as Pactiv, as the surviving corporation, has no obligation to file a petition, any Pactiv stockholder who desires a petition to be filed is advised to file it on a timely basis. No petition timely filed in the Delaware Court of Chancery demanding appraisal will be dismissed as to any Pactiv stockholder, however, without the approval of the Delaware Court of Chancery, which may be conditioned on any terms the Delaware Court of Chancery deems just.

 

The cost of the appraisal proceeding may be determined by the Delaware Court of Chancery and taxed upon the parties as the court deems equitable in the circumstances. Upon application of a Dissenting Stockholder that has strictly complied with the procedures prescribed in Section 262 of the DGCL, the court may order that all or a portion of the expenses incurred by any Dissenting Stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees, and the fees and expenses of experts, be charged pro rata against the value of all shares entitled to appraisal. In the absence of this determination or assessment, each party bears its own expenses. A Dissenting Stockholder that has timely demanded appraisal in compliance with Section 262 of the DGCL will not, after the effective time of the merger, be entitled to vote the Pactiv common stock subject to such demand for any purpose or to receive payment of dividends or other distributions on the Pactiv common stock, except for dividends or other distributions payable to stockholders of record at a date prior to the effective time of the merger.

 

At any time within 60 days after the effective time of the merger, any Dissenting Stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will have the right to submit a written withdrawal of the stockholder’s demand for appraisal and to accept the right to receive merger consideration in the merger on the same basis on which Pactiv common stock is converted in the merger. After this 60 day period, a Dissenting Stockholder may withdraw the stockholder’s demand for appraisal only with the written consent of Pactiv or Reynolds and the approval of the Delaware Court of Chancery.

 

Written Demands

 

When submitting a written demand for appraisal under Delaware law, the written demand for appraisal must reasonably inform Pactiv of the identity of the stockholder of record making the demand and indicate that the stockholder intends to demand appraisal of the stockholder’s shares. A demand for appraisal should be executed by or for the Pactiv common stockholder of record, fully and correctly, as that stockholder’s name appears on the stockholder’s stock certificate. If Pactiv common stock is owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, the demand should be executed by the fiduciary. If Pactiv common stock is owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, should execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner and expressly disclose the fact that, in exercising the demand, he, she or it is acting as agent for the record owner.

 

A record owner who holds Pactiv common stock as a nominee for other beneficial owners of the shares may exercise appraisal rights with respect to the Pactiv common stock held for all or less than all beneficial owners of the Pactiv stock for which the holder is the record owner. In that case, the written demand must state the number of shares of Pactiv common stock covered by the demand. Where the number of shares of Pactiv common stock is not expressly stated, the demand will be presumed to cover all shares of Pactiv common stock outstanding in the name

of that record owner. Beneficial owners who are not record owners and who intend to exercise appraisal rights should instruct the record owner to comply strictly with the statutory requirements with respect to the delivery of written demand prior to the taking of the vote on the merger.

 

Pactiv stockholders considering whether to seek appraisal should bear in mind that the fair value of their Pactiv common stock determined under Section 262 of the DGCL could be more than, the same as or less than the value of the right to receive merger consideration in the merger. Also, Pactiv and Reynolds reserve the right to assert in any appraisal proceeding that, for purposes thereof, the “fair value” of the Pactiv common stock is less than the value of the merger consideration to be issued in the merger.

 

The process of dissenting and exercising appraisal rights requires strict compliance with technical prerequisites. Pactiv stockholders wishing to dissent and to exercise their appraisal rights should consult with their own legal counsel in connection with compliance with Section 262 of the DGCL.

 

Any stockholder who fails to strictly comply with the requirements of Section 262 of the DGCL, attached as Annex C to this proxy statement, will forfeit his, her or its rights to dissent from the merger and to exercise appraisal rights and will receive merger consideration on the same basis as all other stockholders.

 

THE PROCESS OF DISSENTING REQUIRES STRICT COMPLIANCE WITH TECHNICAL PREREQUISITES. THOSE INDIVIDUALS OR ENTITIES WISHING TO DISSENT AND TO EXERCISE THEIR APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR OWN LEGAL COUNSEL IN CONNECTION WITH COMPLIANCE UNDER SECTION 262 OF THE DGCL. TO THE EXTENT THERE ARE ANY INCONSISTENCIES BETWEEN THE FOREGOING SUMMARY AND SECTION 262 OF THE DGCL, THE DGCL SHALL CONTROL.

 

Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, at the effective time of the merger, Sub, an indirect wholly owned subsidiary of Reynolds and a party to the merger agreement, will merge with and into us. We will survive the merger as an indirect wholly owned subsidiary of Reynolds. Our certificate of incorporation, as in effect immediately prior to the effective time of the merger, will at the effective time of the merger be amended and restated in full to read as set forth in Exhibit A of the merger agreement and as so amended and restated will be the certificate of incorporation of Pactiv, as the surviving corporation, until thereafter amended as provided by law. The bylaws of Sub, as in effect immediately prior to the effective time of the merger, will be the bylaws of Pactiv, as the surviving corporation in the merger, until thereafter amended as provided by law.

 

At the effective time of the merger, each outstanding share of our common stock, other than treasury shares, shares owned by Reynolds, Sub or any of their direct or indirect wholly owned subsidiaries, and shares held by stockholders who perfect their appraisal rights, will be converted into the right to receive $33.25 in cash, without interest and less any applicable withholding tax. Treasury shares and shares owned by Reynolds, Sub or any of their direct or indirect wholly owned subsidiaries will be cancelled immediately prior to the effective time of the merger.

 

As of the effective time of the merger, all shares of our common stock will no longer be outstanding and will automatically be cancelled and will cease to exist, and each holder thereof will cease to have any rights as a stockholder, except the right to receive $33.25 per share in cash, without interest and less applicable withholding tax (other than stockholders who have perfected their appraisal rights).

 

At the effective time of the merger, each outstanding option granted under our 2002 Incentive Compensation Plan or any other equity-based compensation plan of Pactiv, whether or not vested or exercisable, will be cancelled

and converted into the right to receive an amount in cash, without interest and less any applicable withholding tax, equal to the product of:

 

 

At the effective time of the merger, each outstanding restricted stock award granted under our 2002 Incentive Compensation Plan or any other equity-based compensation plan of Pactiv, will fully vest and such awards will be cancelled and converted into the right to receive the $33.25 per share in the same manner as shares of our common stock, with such payment to be subject to any applicable withholding tax.

 

At the effective time of the merger, each outstanding performance share award granted under our 2002 Incentive Compensation Plan or any other equity-based plan will be cancelled in exchange for an amount in cash, without interest and less any applicable withholding tax, equal to the product of $33.25 and that number of shares determined as the sum of (x) with respect to any completed calendar year(s) or other measuring period(s) for the award, the number of shares notionally or conditionally vested by us for the portion of the award related to such year(s) or period(s) plus (y) with respect to any calendar year(s) or other measuring period(s) for which we have not allocated a notional or conditional number of shares (including the current and future years), the number of shares determined as if 100% of any performance targets or goals were achieved during such year(s) or period(s) and assuming satisfaction of all other conditions for receiving the target amount with respect to all such awards had been met.

 

Subject to the satisfaction of the obligations set forth above, we will terminate our 2002 Incentive Compensation Plan and any other equity-based plan as of the effective time of the merger.

 

At the time the 2010 annual cash bonuses would have been paid under the terms of the applicable plan (or on the closing date of the merger for participants of our Amended and Restated Pactiv Corporation Change-in-Control Severance Benefit Plan for Key Executives), we will pay to each participant who has been granted an annual cash bonus in respect of the 2010 calendar year under each of our Executive Incentive Compensation Plan and 2002 Incentive Compensation Plan a minimum bonus equal to a pro rata portion (based on elapsed time through the effective time of the merger) of the cash payment that would have been made thereunder if 100% of any performance targets or goals for the calendar year were achieved and all other conditions for receiving payment were met. Any participant who voluntarily terminates his or her employment with Pactiv prior to the end of the 2010 calendar year will forfeit the right to any minimum bonus. In the event that the merger closes in 2011, the same principles will apply with respect to the payment of annual cash bonuses for the 2011 calendar year. All bonus payments are subject to applicable tax withholding.

 

As of the effective time of the merger, we will terminate our Deferred Compensation Plan and Deferred Retirement Savings Plan. We will pay to each participant under each plan the balance of each such participant’s deferred compensation account (whether vested or unvested) in a lump sum cash payment in accordance with the terms and conditions set forth in each plan. In addition, as of or prior to the effective time of the merger, we will terminate our Supplemental Executive Retirement Plan and pay to each participant his or her accrued benefit in a lump sum cash payment, in accordance with Section 409A of the Code. Any payments made under each plan will be subject to applicable tax withholding and, if applicable, holding periods required by Section 409A of the Code.

 

The merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware or at such later time as is agreed upon by the parties to the merger agreement in writing and specified in such certificate of merger, and such time will be the effective time. The filing of the certificate of merger will occur at the closing, which will take place at (i) 9:00 a.m., New York City time, on a date to be agreed by the parties, which will be no later than five business days after the satisfaction or waiver of all of the conditions to the parties’ obligations to consummate the merger (other than conditions that by their terms are to be satisfied by

deliveries at the closing, but subject to the satisfaction or waiver of such conditions at the closing) or (ii) such other date and time as agreed to in writing by the parties.

 

If the merger is completed, our common stock will be delisted from and will no longer be traded on the NYSE and will be deregistered under the Exchange Act. Following the completion of the merger, Pactiv will no longer be an independent public company.

 

While Pactiv does publicly disclose certain quarterly and annual financial forecasts as to future performance, earnings and other results, Pactiv does not as a matter of general practice publicly disclose or prepare financial forecasts beyond the upcoming full fiscal year. However, to assist our board of directors in its consideration and evaluation of the merger and to assist Perella Weinberg with its evaluation of the fairness, from a financial point of view, of the $33.25 cash merger consideration, we provided our board of directors and Perella Weinberg with certain non-public, internal financial forecasts regarding our anticipated future operations under three different scenarios for fiscal years 2010 through 2014 that are referred to as the Base Case Forecasts, the Recovery Case Forecasts and the Recessionary Case Forecasts and, collectively, the Financial Forecasts. The Financial Forecasts were prepared by management in March of 2010 and do not take into account the proposed merger set forth in the merger agreement. The Base Case Forecasts and Recovery Case Forecasts were provided to Reynolds and the other parties who conducted a due diligence review of Pactiv.

 

The Base Case Forecasts assume, among other things, a recovery in the general economy as well as the markets for our Consumer Products segment and our Foodservice/Food Packaging segment, margins would reflect an average of our historical range and we would not make any contributions to our U.S. pension plan. The Recovery Case Forecasts assume, among other things, a quicker recovery in the general economy, with the market for our Consumer Products segment growing with the general economy and the market for our Foodservice/Food Packaging segment growing somewhat faster than the general economy, margins would be at the higher end of our historical range and we would not make any contributions to our U.S. pension plan. The Recessionary Case Forecasts assume, among other things, that there is effectively no recovery in the general economy and that general economic growth is very limited, driving limited growth in the markets for our Consumer Products segment and our Foodservice/Food Packaging segment, and that margins would be at the lower end of our historical range.

 

At the time of our spin-off from Tenneco in 1999, we became the sponsor of Tenneco (now Pactiv) pension plans. These plans cover most of our employees as well as individuals/beneficiaries from many companies previously owned by Tenneco, but not owned by Pactiv. As a result, while persons who are not current employees do not accrue benefits under the plans, the total number of individuals/beneficiaries covered by these plans is much larger than would have been the case if only Pactiv personnel were participants. For this reason, the impact of the pension plans on our net income, shareholders’ equity and cash from operations is greater than is typically found at similarly sized companies. Changes in the following factors can have a disproportionate effect on our results compared with similarly sized companies:

 

 

 

 

 

 

The requirement to make contributions to this plan is a function of several factors, the most important of which are the return on plan assets and applicable funding discount rate used in calculating plan liabilities. During 2009, we contributed $550 million pretax to the plan, and plan assets earned a return of approximately 26%. As of December 31, 2009, our U.S. pension plan was 94% funded on an ERISA basis, which determines the minimum

funding requirements for the plan. As long as our funded ratio is above 60%, there is no meaningful impact on us or to the plan. Were Pactiv to remain a stand-alone company, Pactiv would not expect to make additional sizeable contributions to the plan for the foreseeable future.

 

We believe that cash flow from operations, available cash reserves, and the ability to obtain cash under our credit facility and asset securitization program will be sufficient to meet current and future potential pension funding, liquidity, and capital requirements.

 

We have included below summary information from the Financial Forecasts solely to give our stockholders access to certain non-public information that was furnished to our board of directors, Perella Weinberg, Reynolds and the other parties who conducted a due diligence review of Pactiv. The summary information from the Financial Forecasts is not being included in this document to influence your decision whether to vote for the merger.

 

The Financial Forecasts were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines of the SEC regarding forward-looking statements, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, or GAAP. The Financial Forecasts do not necessarily comply with GAAP and contain certain financial measures that were not calculated in accordance with GAAP. In addition, the Financial Forecasts were not prepared with the assistance of, or reviewed, compiled or examined by, independent accountants.

 

The Financial Forecasts were based on numerous variables and assumptions that are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and uncertainties that are difficult to predict and beyond our control, including certain of the factors described under “Forward-Looking Statements” beginning on page 14. The Financial Forecasts also reflect assumptions as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in the Financial Forecasts. Accordingly, there can be no assurance that any of the Financial Forecasts will be realized. In addition, the Financial Forecasts are not fact and should not be relied upon as being necessarily indicative of future results, and readers of this document are cautioned not to place undue reliance on this information.

 

The inclusion of the Financial Forecasts in this document should not be regarded as an indication that any of Pactiv or its affiliates, advisors or representatives considered the Financial Forecasts to be predictive of actual future events, and the Financial Forecasts should not be relied upon as such. None of Pactiv or its affiliates, advisors or representatives can give you any assurance that actual results will not differ from the Financial Forecasts. The Financial Forecasts speak only as of the time they were prepared. Pactiv has made no representation to Reynolds in the merger agreement or otherwise, concerning the Financial Forecasts.

The Financial Forecasts for fiscal years 2010 through 2014 included the following: