Broad-based British packaging company Rexam plc, with operations in Europe, the Americas and the Far East, plans to sell off 20 of its less-profitable businesses, which have sales totaling £303 million ($506.4 million).
In a bid to streamline and concentrate on core growth areas, the London firm has chosen to dispose of industrial, beauty, food and beverage packaging units with sales of £169 million ($282.5 million). Other units for sale will include some involved in coated film production.
But Rexam said it will not move out of major established areas, in particular, thin-wall plastic containers. Health-care, building and engineering operations also will escape unscathed. The company has declined to identify specific manufacturing businesses that it plans to divest.
It has set up a special management team — Rexam Octagon, headed by David Jones, chief executive officer of its Rexam Containers division — to dispose of the 20 businesses, which represent operating assets of £161 million ($269.1 million) and combined annual operating losses of £2 million ($3.34 million).
Subsidiary Rexam Inc. of Charlotte, N.C., has film plants in Lakeville, Minn., and Appleton, Wis., with total sales of $99 million in 1995, according to Plastics News' 1996 ranking of North American film and sheet manufacturers.
Rexam Inc. also has plastic container and closure operations in Missouri, Illinois, Indiana and Canada. Rexam Medical Packaging of Vernon Hills, Ill., has blown film extrusion lines and converting, coating, and laminating plants in the East and Midwestern United States.
Only a year ago, Rexam expanded its beauty packaging when it paid around $41 million for lipstick tube injection molder Mark Industries Inc. of Torrington, Conn. It renamed the $45 million business, which has two plants, Rexam Cosmetic Packaging Inc.
Rexam, formerly Bowater plc, announced in September it was restructuring into seven clearly defined market sectors. It said then it planned to trim its portfolio to focus on opportunities for growth within each sector.
A new management team, with Swede Rolf Borjesson as chief executive, took over last year. The company already has sold businesses, none of them plastics related, last year with combined annual sales of £216 million ($361 million).
Packaging analyst Tim Rothwell of London brokerage house Gerrard Vivian Gray said the restructuring was necessary following poor Rexam results during the past two years.
While plastics will not form the major part of the divestitures, some plastics businesses will be affected. Among the areas targeted for disposal, food packaging had reported the worst results, Rothwell said.
One business he expects will be sold is that of flexible polypropylene interbulk containers in the industrial packaging division. The business is profitable but labor-intensive, and does not fit within the company's new organization.
Rothwell said Rexam has a technical advantage with its rotational molding process for thin-wall containers, so that area will not be divested.
He said Rexam Octagon acts as a holding company for the units for sale and its executive team was offered bonuses and other incentives to execute a swift and profitable sale.
Rothwell said it is not a bad time to sell off the businesses with raw material prices rising and with the potential to improve profits in the businesses.
