In a deal designed to bolster its balance sheet, James River Corp. will invest $24 million and 55 percent of its Handi-Kup foam cup operations to buy Benchmark Corp.'s thermoformed plastics cutlery operations. Under the agreement, James River and Benchmark will merge their proprietary expanded polystyrene foam cup businesses into a joint venture to be run by majority owner Benchmark, based in Tolleson, Ariz., said Celeste Gunter, investor relations director for James River.
When the merger is completed later this month, the newly combined cup operations will become the second-largest U.S. producer of foam cups. Dart Container Corp. of Mason, Mich., is the largest.
Buying Benchmark's cutlery business will also make James River the leading supplier of plastic cutlery to the North American food market, according to a James River news release.
James River will contribute its four Handi-Kup plants, in Corte Madera, Calif.; Jacksonville, Fla.; Metuchen, N.J.; and West Chicago, Ill., and own 45 percent of the outfit. About 500 James River employees will be included.
Six Benchmark plants produce its WinCup-brand EPS foam cups. Gunter said Nov. 2 by phone that the venture probably will work towards using only the WinCup-brand name in the marketplace.
She would not disclose sales for Handi-Kup operations. WinCup officials did not return telephone calls.
The deal will add $70 million in sales to James River's plastic cutlery business, nearly doubling it, Gunter said. It also will give the company plastic cutlery and straw operations in Houston, Atlanta andLos Angeles.
The firm had been looking for ways toboost cutlery capabilities and add geographical diversity to its Leominster, Mass., business, either by building or acquiring plants. But ``building something new puts [companies] at a disadvantage,'' she said, ``by adding to overall industry capacity.''
The companies expect the cutlery transaction to close Nov. 6.
James River, the Richmond, Va., consumer packaging leader, hopes to reduce debt and boost earnings both by growing its already-profitable plastics cutlery business, and focusing on polyethylene-coated paper-based products, such as its Dixie cups, Gunter said. The public firm is traded on NYSE.
The firm has reduced total debt this year by $650 million, mainly by spinning off its cyclical communications paper business last August, Gunter said.
Of the company's $6 billion in sales, consumer products made up the largest segment - $2.5 billion last year, Gunter said. Its primary product lines-two-thirds-are paper towels and tissues; but one-third of those sales are from table-top products, which are mainly paper-based but include cutlery.