With the gong barely sounded to begin a new year, Tenneco Packaging aggressively is pursuing plans to double its $4 billion business by acquiring the plastic packaging division of NV Koninklijke KNP BT of Amsterdam.
The deal comprises KNP's protective and flexible packaging operations in North America and Europe, which together make up about $550 million of KNP's $8 billion in sales. Terms were undisclosed.
Astro-Valcour Inc., based in Glens Falls, N.Y., is KNP's protective packaging subsidiary in North America. At one Canadian and nine U.S. plants, AVI makes bubble cushioning, polyethylene and polypropylene foam sheet and planks, paper-based cushioning and other protective packaging for industries that include electronics, appliances and consumer products.
The segment is one that Tenneco has been looking to expand, according to Saralee Norton, vice president of quality management and strategy.
In a Jan. 16 telephone interview, Norton said the largest portion of the KNP division's products are plastic, but the acquisition involves some multimaterial packaging, such as padded mailers — envelopes lined with bubble cushioning.
KNP's plastic products complement Tenneco's existing protective packaging line, which mainly consists of corrugated paper-based products, sold under the Hexacomb trade name. Tenneco acquired Hexacomb — first entering the protective packaging arena — in 1995, Norton said.
``A key part of our strategy [is] being broadly based in packaging and having the widest array of products to offer the customer,'' she said. ``When you go into a business, you either need leadership or feel that you can quickly get a leadership position. We think in the U.S., Astro-Valcour will give us a very significant entree into the position. It gives us the scale.''
The acquisition will put Tenneco in competition with Sealed Air Corp. of Saddle Brook, N.J.
KNP spokesman Patrick Deleede said plastics make up roughly 90 percent, or $495 million, of the packaging division's sales. Neither he nor Norton would break out AVI's share.
Although Tenneco Packaging emphasizes that its growth is focused on segments, not materials, plastic products became a significant piece of the total business when the firm bought Mobil's Plastics Division in 1995. With that $1.3 billion buy, the Evanston, Ill.-based packaging giant vaulted to the top spot in Plastics News' thermoformers ranking, then fattened its lead with the August 1996 purchase of Amoco Foam Products Co. of Smyrna, Ga.
If the KNP deal closes in March, as scheduled, Tenneco will have roughly $2.2 billion in plastics sales in what it calls ``specialty packaging,'' which includes thermoformed containers; consumer and institutional trash bags; food bags; polystyrene foam cups, plates, carry-out containers and meat trays; foam building insulation; and PE stretch film.
As for film, KNP will give Tenneco its first flexible packaging presence in Europe, strengthening its global position overall, Norton said.
The company already does thermoforming in Europe, mainly clear and colored plastic packaging for cookies, crackers and confections, she said. But KNP's four plants in Germany and one in Egypt extrude, convert and print PE and PP film mainly into packaging for detergents, food and hygienic paper and medical products.
KNP's path has not always been clear. In late 1994 it beefed up its U.S. flexible packaging business, Sengewald USA Inc., by buying two polyethylene film plants from Stone Container Corp. A year later, KNP did a turnabout and said it wanted to unload all its flexible packaging businesses, both U.S. and European, to focus on protective and one-way transport packaging.
Early last year it finally sold Sengewald to Hood Cos.' Southern Bag Corp. subsidiary in Madison, Miss. Sengewald of Marengo, Ill., also made PE bags, bubble cushioning and monolayer and coextruded and laminated films.
As part of KNP's flexible and protective packaging businesses, Tenneco also will buy: PSG Pillo-Pak in the Netherlands; Jiffy Packaging and Ambassador Packaging in the United Kingdom; PSG Sentinel in Belgium and Germany; Airpack in Italy and Poland; Aircal in France; Kobusch-Folien, Sengewald Verpackungen, Sengewald Klinikprodukte and Nordwest Verpackung in Germany; and Kobusch Packaging in Egypt.
Besides Glens Falls, AVI's protective packaging operations in North America include plants in Plymouth, Ind.; Wurtland, Ky.; Granite Falls, N.C.; Orlando, Fla.; Corsicana, Texas; Hayward, Calif.; and Wenatchee, Wash.; Richter Manufacturing in Pomona, Calif.; and Astro-Polyfoam Ltd. of Mississauga, Ontario. KNP's plastics division employs 3,000 worldwide. Now KNP's strategy is to expand its wastepaper-based transport packaging.
As for strategy, Tenneco Inc., based in Greenwich, Conn., seems to be following the straight-line approach. As scheduled, Tenneco stockholders approved the spin-off of shipbuilding and natural gas interests in December to focus the firm on packaging and auto parts.
Plastics News reporter Sarah S. Smith also contributed to this story.