S.C. Johnson & Son Inc. will mark its entry into the plastic film industry when its acquisition of DowBrands, the consumer products subsidiary of Dow Chemical Co., becomes final around year-end, pending regulatory approval.
Terms of the deal were not released, though speculation from financial sources is that the sale is for about $1.5 billion.
Indianapolis-based DowBrands comprises two business units. The home food management unit includes low density polyethylene Ziploc brand bags, Saran Wrap film made from polyvinylidene chloride and Handi-Wrap PE-based film.
Also included is the home-care products division, encompassing Dow Bathroom Cleaner with Scrubbing Bubbles, Spray'N Wash, Fantastik and Glass Plus.
DowBrands' joint venture with Melitta Bentz KG of Minden, Germany, which formed in October 1996, is not included in the acquisition. DowBrands may sell its 35 percent interest in the venture to S.C. Johnson. Melitta holds the remaining 65 percent.
Four North American plants and about 1,000 employees will be included in the deal. The locations are Bay City, Mich.; Fresno, Calif.; Urbana, Ohio; and Varennes, Quebec. The Bay City plant extrudes Ziploc bags and Handi-Wrap film while the Fresno facility also manufactures Ziploc bags. A Dow plant in Midland will supply rolls of Saran Wrap to S.C. Johnson. DowBrands officials would not disclose the number of lines operating in each plant.
Substantially all the employees at the plants will become employees of S.C. Johnson.
``In the months to come, we'll see how everyone fits,'' said Jim May, S.C. Johnson director of corporate public relations worldwide. ``If any employees are eliminated, they'll be offered a severance package equivalent to what DowBrands offers. It's still too early to tell how many and who will be affected.''
The divestiture allows Dow Chemical in Midland, Mich., to focus on its specialty and commodity chemical businesses.
``We evaluated many options, from investing in and expanding the business to strategic alliances, for obtaining the critical mass necessary for DowBrands to achieve global leadership in the consumer products marketplace,'' William Stavropoulos, Dow president and chief executive officer said in a news release. ``However, none of these options provided the resources DowBrands needed to be competitive worldwide.''
DowBrands had been hampering Dow's earnings for many years. After restructuring, last year it returned to a profitable level. DowBrands has sales around $800 million and an operating profit of $100 million to $130 million — less than 5 percent of Dow's total. Dow plans to use earnings from the sale for core-related business acquisitions, as well as for share repurchases.
May said food storage products are one of the five fastest-growing nonfood industries and Ziploc is the No. 1 zippered bag in the marketplace.
S.C. Johnson has an injection molding plant that makes caps and closures for some of its products, but this marks the Racine, Wis., company's first step into selling plastic consumer goods.
S.C. Johnson expects the acquisition to increase its sales by about 20 percent. Last year, the firm had sales of more than $4 billion. It operates plants in more than 50 countries and employs more than 12,000.