Last week's acquisition of Smorgon Consolidated Industries Pty. Ltd.'s PET blow molding division gives Australia's Southcorp Holdings Ltd. access to PET technologies that could spur Southcorp's intention to expand in North America. Southcorp Holdings, headquartered in Adelaide, remains keen to purchase plastics companies in North America, despite the A$162 million (US$115.6 million) purchase of Sydney, Australia-based Smorgon.
``We are assessing a number of things the Smorgon purchase can do,'' said Mark Puchalla, director of marketing and product development for North American Packaging Corp., the Atlanta-based independent unit of Southcorp.
``We don't do much with PET bottles now, and the increasing globalization of the industry makes it a logical thing to consider. We could expand in any area except glass containers and liner board.''
Puchalla said Southcorp still is eyeing a major expansion in North America ``in the near, rather than long term.''
One of the Smorgon technologies Southcorp could use is the Renew repolymerization process for post-consumer PET bottles, which already has approval from the U.S. Food and Drug Administration for direct contact with food.
North American Packaging operates 11 plants, making polypropylene products and films, and blow molds bottles, primarily of high density polyethylene.
Southcorp has four divisions - wine, water heaters, appli-ances and packaging - but the Melbourne, Australia-based packaging division, Southcorp Packaging, has been the backbone of the company's earnings during the past three years with sales for its 1995-96 fiscal year estimated to reach A$1.1 billion (US$784 million), including North American sales of A$150 million (US$107 million).
Southcorp Packaging's current products include aluminum cans, milk and juice cartons, pails, drums, containers, flexible films and foils.
Barry Watts, Southcorp Packaging's executive general manager, said Southcorp still is keen to buy small to medium-sized North American companies that would fit with its current operations in food, beverage and industrial packaging.
``This outlay won't tie up our expansion plans,'' he said.
However, a market analyst from Australian firm Morgan
Stockbroking Ltd. said the Smor-gon Plastics purchase meant Southcorp was unlikely to make any further acquisitions in the short term.
The analyst said the price paid for Smorgon was at ``the top end of what the market expected. This is definitely a big outlay and will take up the main part of their expenditure program for the coming year,'' the analyst said.
But Watts said the price was ``fair,'' and ``properly reflects the value of the total package.''
When plans to sell the unit were first announced, industry watchers expected Smorgon Plastics to net A$70 million (US$49.9 million), but analysts now say their figure did not include Smorgon's share in a Malaysian joint venture.
Southcorp's purchase includes five PET plants in Australia anda 50 percent interest in plastics packaging company Kian Joo Can Factory Berhad, located in Malaysia.
The A$30 million (US$21.4 million) joint venture began production in April 1994 and has PET bottle contracts with Coca-Cola and Pepsi in Malaysia and Singapore, and export orders from Hong Kong and China.
Southcorp already owns a plastics manufacturing plant in Malaysia.
Although financial analysts said Southcorp's purchase was ``a bit pricey,'' they said PET is a growth business in Australia and the deal opened opportunities in Asia, so the price may be justified in the long run.
The purchase also gives Southcorp exclusive rights to the Renew PET recycling technology in Australia and New Zealand, which is close to commercial production by Smorgon Plastics.
Melbourne-based Innovations in PET Pty Ltd., a joint venture between inventor Simon West's company Swig Pty Ltd., of Melbourne, and Smorgon Plastics, holds worldwide rights to the Renew process.
Watts said Southcorp now had ``priority access'' to Renew technology licenses for Malaysia and the rest of Southeast Asia. But Smorgon retains its share of Innovations and, while Watts is confident Southcorp eventually will acquire Smorgon's share, he said Smorgon is ``unwilling to let up its stake immediately.''
Southcorp Managing Director Graham Kraehe said the Smorgon acquisition is ``consistent with Southcorp's strategy to seek packaging growth in areas which have critical mass, world-class technology, and international growth potential.''