Two leading Brazilian companies, Industria de Papeis de Arte Jose Tscherkassky SA, known as Toga, and Dixie Lalekla SA, are negotiating a merger to form one of the region's biggest packaging groups. Negotiations began in February and a deal is anticipated by late June, according to Walter Schalka, chief executive officer of Dixie Lalekla, which reported 1994 sales of about $90 million. Toga had sales for last year of more than $120 million.
Schalka said the deal would create a $250 million company.
Toga, a major Brazilian flexible plastics packaging and cartonboard converter, sees a merger as the means to strengthen its position in the face of powerful raw material suppliers and multinational customers.
The SÃo Paulo-based company already has formed several international joint ventures with U.S., German and Swiss firms, including a new three-partner enterprise to make diaper bags for Procter & Gamble Co. in Brazil.
Dixie Lalekla resulted from the 1989 acquisition of a former Brazilian paper and plastics packaging subsidiary of American Can by local tissue products manufacturer Lalekla.
The firm, now chief supplier of disposable catering ware to McDonald's and other U.S. fast-food chains in Brazil, has four divisions: packaging, food service, consumer and institutional products. It runs polypropylene and polyethylene extrusion, coextrusion, thermoforming and injection molding lines at a SÃo Paulo plant and at a 450,000-square-foot plant in Votorantim, east of the city.
``We think that a merger will increase our [product] supply base and improve our position in the acquisition of raw materials,'' Toga's President and CEO Sargio Haberfeld told the SÃo Paulo business journal of Not¡cias.
His brother Roberto Haberfeld, also a Toga director, confirmed that merger talks with Dixie are continuing.
``We're continuing to discuss what form a merger should take and at the right time we'll announce the outcome,'' he said.
Haberfeld said that as a processor, Toga is being squeezed between big suppliers and multinational customers, and the company needs to find a way of growing.
``The world is getting smaller and our suppliers are fewer and bigger. It is a matter of pressure from both sides,'' he said.
Roberto Haberfeld pointed out that there is synergy between the two companies and an agreement will ``complete our product lines'' and add thermoforming capability.
A deal will also strengthen the processor in the face of increased resin prices. Both companies supply major multinational customers like Unilever, through its Brazilian subsidiary Gessy Lever SA, and the Nestle group.
Schalka said, ``From our point of view, having critical mass to compete in the packaging business is becoming essential.''
He added that Dixie is already working to become the lowest cost producer in the market.