By: Jim Johnson
August 13, 2013
Just last fall, Portola Packaging Inc.'s CEO talked about recovering from filing for Chapter 11 bankruptcy protection and expressed excitement about what the future holds.
Less than a year later, the Naperville, Ill.-based maker of plastic closures now sees that future as part of Silgan Holdings Inc., a $3.6 billion maker of plastic and metal containers and closures with 81 plants around the world.
Silgan, of Stamford, Conn., is paying $266 million for the firm.
Bolting on Portola's $200 million in annual sales and eight plants in both North America and Europe beefs up Silgan's global closure business.
Silgan, in making the transaction, pointed to Portola's innovation in closure design and operational leadership.
Portola, back in 2008, went through what is known as a prepackaged Chapter 11 reorganization where holders of senior debt took over the company. Since then, the company has focused on lean manufacturing, cutting employee ranks from 1,100 to 700, CEO Kevin Kwilinski said at the Plastics Caps & Closures 2012 conference in September near Chicago.
"It took us a few years to get our feet under us," Kwilinski said at the show last year. "But now that we've done it we have … an opportunity to grow the business and we're very excited about what the future holds."
Plastics News coverage of the company's Chapter 11 case in 2008 indicated that Wayzata Investment Partners LLC was one of the larger holders of the company's senior notes at the time and was going to provide $10 million to fund the restructuring. Wayzata currently lists Portola as one of its investments on its website.
Portolo Chief Financial Officer Glenn Fish declined comment on the deal.
Silgan indicated in a news release the new business will be "slightly accretive to earnings initially, excluding the impact of the required purchase accounting write-up of inventory." Profits will grow during the next 18 months as Portola is folded into Silgan.
Adding Portola's assets could add a nickel to a dime per share to earnings in 2014, according to a research note from Wells Fargo Securities LLC.
"We are excited about the opportunity to expand our relatively small European plastic closure presence through Portola's manufacturing facilities in the United Kingdom and Czech Republic," Silgan CFO Bob Lewis said in a statement.
Silgan makes both plastic and metal closures, posting sales of $181.4 million in products in just the second quarter alone, making the firm one of the largest caps and closure operations in the United States.
Portola, just last summer, shuttered its cosmetics packaging operations to focus on its core business of closures and bottles.
The cosmetics business accounted for less than 10 percent of sales and the beverage closure business had been growing by double digits annually for the previous three years, the company said last year.
Wells Fargo Securities viewed the deal favorably.
"It provides SLGN with a more formidable position in the European plastics closure market," senior analyst Christopher D. Manuel wrote in the research note.
And, Manual wrote, "It provides SLGN a platform for future expansion in the faster-growing closure/dispensing closure market."
Silgan could use cash on hand or its revolving line of credit to fund the purchase, Wells Fargo anticipated.