When it acquires Borden's plastics packaging business this fall, AEP Industries Inc. will triple its sales, gain 27 plants, two brand-new film segments and a stake in Europe and the Far East. The $360 million purchase will thrust the New Jersey firm, which until now has operated on a North American playing field, into the global arena - by placing roughly one-fourth of its sales overseas.
It also adds PVC and biaxially oriented polypropylene films to AEP's product mix.
After Borden announced its intent to divest the packaging business in January, dozens of companies expressed their interest, according to Nicholas Iammartino, the firm's vice president of public affairs.
With the help of investment banker Morgan Stanley & Co. of New York, Borden whittled down the prospective buyers: ``AEP came out as the acquirer,'' he said.
If the deal closes as expected in September, it will take Borden's business - privately held only since March 1995 - public, once more.
Right now polyethylene film makes up almost all - 99 percent - of AEP's $242.9 million in packaging sales, with industrial uses accounting for 45-50 percent of that total, for applications such as shrink films, magazine overwrap and mattress bags, according to Paul Feeney, AEP executive vice president. Agricultural and institutional applications make up another 10-15 percent, he said by telephone from AEP's headquarters in South Hackensack. Stretch pallet wrap holds the remaining 40 percent chunk.
AEP stands to grow its pallet wrap market considerably, since PE pallet wrap is the second-largest piece of Borden's $625 million packaging business.
PVC films represent Borden's biggest segment, both in North America and worldwide, Iammar-tino said. Feeney confirmed that.
``We estimate that [Borden's] presence in North America is approximately 45-46 percent in supermarket and institutional PVC film,'' he said.
In Europe, its share is close to 40 percent, he said.
Borden's PVC Resinite film is used for wrapping meats, vegetables, fruits and bakery goods in supermarkets; its PVC Sealwrap finds use institutionally.
The company also makes a small amount of PVC pallet wrap. It manufactures PVC films at all five of its North American sites, including at the packaging unit's North Andover, Mass., headquarters.
At a second plant in North Andover, Borden produces BOPP film, used mainly in food packaging - bags for snacks, dried pastas and candy - and in some industrial applications, such as adhesive tabs on disposable diapers, Iammartino said. Its main brand is Proponite; OPPtimum is the trademark for its metalized BOPP.
Feeney said AEP also will retain Borden's alliance with Moplefan SpA of Milan, Italy, to market the latter's OPP film products in North America.
He added that AEP already processes a couple million pounds per year of PP used in coextruded film structures.
Neither Feeney nor Iammartino could disclose production capacity for any of the Borden films, though they both said OPP is the smallest portion of Borden's total packaging.
Ken Glover, a vice president at Mobil Chemical Corp.'s films division, estimated Borden's OPP capacity in North America at 30 million to 40 million pounds per year.
``With respect to our industry in oriented polypropylene, [Bor-den's] capacity represents a small percent of the capacity in North America,'' Glover said.
He pegged the total North American capacity for OPP at 600 million to 700 million pounds.
Mobil vies with AET Packaging Films for the top position in the North American OPP film market. Glover said his firm has about 250 million pounds in domestic nameplate capacity for BOPP - roughly 90 percent of it for flexible packaging, a market that still is growing 5-7 percent per year.
But PaineWebber Inc. analyst George Staphos said OPP has seen excess capacity for the past 10-11 years, and that currently market pressures for the film are keeping its producers from successfully raising prices, ``even as polypropylene prices have been on the rise.''
``You're seeing some pretty sharp price pressures this year,'' Staphos said from his New York office.
Finally, AEP also will acquire Borden's rigid plastic products, which include expanded polystyrene trays and other plastic food-service products manufactured strictly in Europe.
Chief among AEP's plans for the new businesses is cutting capital spending in North America, according to J. Brendan Barba, president and chief executive officer. The firm wants to take $25 million out of production costs by year's end 1998, and still is working on how it will do that, Feeney said.
Under consideration are several consolidation opportunities, Barba said. But Feeney said his firm has no immediate plans to consolidate operations, and will look at ``a whole spectrum of possible actions,'' such as improving plant efficiency and increasing production.
``It's going to be very important for AEP to reduce [product] cost per pound,'' he said. ``However, you don't necessarily have to close plants to do that.''
When the deal is done, Borden still will have a hand in the till, since it will own at least $80 million worth of newly issued AEP stock. That price translates into roughly 2.4 million shares, giving Borden a 34 percent hold in AEP, the companies said.
Borden, a Columbus, Ohio-based food and chemical giant, also will appoint four of AEP's 10 directors and, together with AEP management, will pick another member to serve on that board.
Retaining a stake in its packaging business was not in Borden's plan from the outset, but the company found the deal ``very attractive,'' Iammartino said.
He said it offers ``the best of both worlds,'' first by providing $280 million in cash proceeds for general corporate purposes, such as investing in other business segments or reducing debt.
Plus, he said, ``We can continue to participate in the growth of the plastics industry, without putting a lot more cash into the business.''
Borden's balance sheet was bolstered significantly when Kohlberg Kravis Roberts & Co. took the firm private in a leveraged buyout last year.
Since then it has lessened debt by roughly $1 million, Iammartino said. Its 1995 sales were about $5.9 billion.
Borden's packaging business employs about 3,500. Borden will retain its packaging operations in South America.
AEP employs more than 1,000 and operates more than 60 extrusion lines at five U.S. plants.