BERRY PLASTICS BUYING RIVAL FIRM PACKERWARE

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Berry Plastics Corp. will boost its share of the plastic drinking cup and container market by acquiring competitor PackerWare Corp. of Lawrence, Kan.

Just last year, the companies were dueling in court over Berry's patent for a large-sized plastic drinking cup that fits in a standard car cup holder. In fact, PackerWare's strong drink cup market is a key reason Berry decided to buy the firm.

``It's a great fit for us from a product line point of view, in that we are both significant in the drink cup business, so it solidifies our position there,'' said Martin Imbler, Berry president.

PackerWare shareholders must approve terms, which were not released, and have until mid-January to finalize the deal, he said.

PackerWare also gives Berry of Evansville, Ind., a piece of the plastic housewares market, with products such as injection molded pitchers and bowls, which are sold in retail chains like Target and Kmart, said PackerWare President Bruce Sims. The firm also molds a line of flowerpots.

But drink cups and housewares are PackerWare's largest segments, Imbler said. Along with the housewares business comes new customers — new channels through which Berry can move its cups and containers, he added.

With 1996 sales of about $44 million, PackerWare may push Berry—now No. 21 in Plastics News' ranking of North American injection molders, with $140.7 million in sales—into a higher slot.

Sims will stay on as vice president of sales and marketing of housewares, in Lawrence, and also will be responsible for ``a significant portion'' of PackerWare's injection molded high density polyethylene drink cup business, according to a Berry news release.

Berry's biggest business is injection molded aerosol overcaps. But both it and PackerWare are large players in the fountain drink market, comprising 12- to 64-ounce HDPE cups, including drive-through-style car cups, most of which are printed for promotional advertising, and sold at fast-food restaurants and convenience stores.

Sims said that PackerWare and Berry have been working on the merger for three to four months.

PackerWare's principal owner and chairman, Jim Schwartzburg, will remain involved with the company as a consultant.

Minority owners include Schwartzburg family members and PackerWare employees through an Employee Stock Ownership Plan, Sims said.

``I think this is going to be great for our company,'' he said. ``There's a combination of good manufacturing practices that will help on both sides of this transaction.''

If the deal closes this month as expected, it will be Berry's fourth acquisition since March 1995, when it entered the injection molded drink cup business by buying Sterling Corp. of Winchester, Va. Last January, Berry grew the cup business by a tad—less than $1 million in sales—with the purchase of Alpha Products' HDPE drink cup line from Aladdin Industries Inc.

Late last year Berry closed its Winchester cup plant and consolidated cup molding at a plant in Charlotte, N.C., that it picked up in late 1995, as part of container molder Tri-Plas Inc. The company also is spending $3.5 million to add on to the Charlotte plant—to accommodate the presses—and to a second facility, in Henderson, Nev., near Las Vegas.

PackerWare also has an operation in Nevada—a 100,000-square-foot plant in Reno—which Imbler said is much smaller than Berry's $30 million-in-sales outfit at Henderson. He noted that his firm has no plans at this time to consolidate those operations.

In Reno and at a 500,000-square-foot plant in Lawrence, PackerWare has about 70 presses total and 500 employees.

Tim Kilpatrick, vice president of cup molder Pescor Plastics Inc., said a consolidation trend in the plastic drink cup industry has placed smaller companies under larger umbrellas. One case in point: In February, British conglomerate John Waddington plc bought Cups Illustrated Inc., a souvenir cup molder in Lancaster, Texas, giving the little private firm a big cash infusion.

``I think [buying PackerWare] will be very positive for Berry, because of the people they're going to inherit through this acquisition,'' Kilpatrick said recently by telephone from Pescor headquarters in Fort Worth, Texas. ``But I also think it's very positive for Pescor: We're one of the last, or the last, of the family-owned companies. Even though [Berry is] buying a percentage of the market, bigger doesn't make better.

``Berry has a tremendous amount of debt they have to service,'' he added.

Berry company officials put that debt at about $216 million, which is offset by a $36.2 million escrow account.

Like PackerWare, Pescor was among the three firms Berry sued for patent-infringement of its car cup design. But, in April, a federal judge ruled Berry's patent invalid. With countersuits filed by Pescor and Packaging Resources Inc. pending against it, Berry has appealed the ruling. Kilpatrick said a hearing is set for Jan. 10.

``We'll probably drop the lawsuit and meet them on the battlefield,'' he said.

Berry's majority owner is Atlantic Equity Partners, a private investment firm.