Greif Bros. Corp. is beefing up its plastic drum operations through a deal with Sonoco Products Co.
Greif, which has three plastic drum plants, is paying $225 million in cash for Sonoco's industrial container group, which has five plastic drum plants and 12 fiber drum plants, plus facilities for research and development, packaging services and distribution.
Greif Bros. had been in the process of developing intermediate bulk containers, but the merger gives the company Sonoco's IBC technology. Greif also plans some consolidation of the plastic and fiber drum operations.
Because some of the two firms' plants are in close proximity, a merger team made up of equal numbers of employees from Sonoco and Greif will look at the capabilities, costs and capacities of the fiber and plastic operations, said Michael Gasser, chairman and chief executive officer of Greif Bros. in a telephone interview.
The team will evaluate how to make the operations more efficient. Gasser expects some machinery movement on the plastic side and plant closings for the fiber drum operations.
``This merger is easier because our cultures are the same and there are not philosophical issues to deal with about how to treat employees and business outlook,'' he said. ``Sonoco is a great company and we have a lot of respect and admiration for them.''
The companies had been talking about the acquisition for about a year, he added.
Greif Bros. runs plastic drum plants in St. Gabriel, La., Houston and Hebron, Ohio. Those plants operate five machines making the high density polyethylene drums.
The deal includes three wholly owned subsidiaries of Sonoco: KMI Continental Fibre Drum Inc., Fibro Tambor based in Mexico and Sonoco Plastic Drum Inc., as well as Sonoco's interest in Total Packaging Systems LLC. These companies last year had combined annual net sales of about $210 million.
Sonoco officials could not be reached for comment. Sonoco had an estimated $41 million in plastic drum blow molding sales last year, placing them at No. 38 in Plastics News' 1997 North American blow molders ranking. Their plastic drum plants are located in Lockport, Ill.; Houston; Hazleton, Pa.; Mt. Sterling, Ky.; and Lavonia, Ga. Those plastics operations employ about 200.
The deal does not include Sonoco's blow molding operation for PET tennis ball containers.
Delaware, Ohio-based Greif Bros. expects to complete the deal in the first quarter of 1998, following due diligence and approval from the regulatory authorities.
Sonoco plans to use the proceeds of the sale to fund its stock repurchase plan and for debt reduction.
Sonoco, based in Hartsville, S.C., announced its intent to repurchase up to $150 million of its common stock when the acquisition was announced.
``Our decision to sell the company's industrial containers business is based on our belief that the industry needs to consolidate,'' Sonoco Chairman and Chief Executive Officer Charles Coker said in a news release.
``We concluded that our shareholders would be better served by Sonoco concentrating its resources on those businesses in which we are more strongly positioned for competitive advantage.''
Greif Bros. reported sales of $649 million for the year ended Oct. 31.
The company manufactures and markets industrial packaging and components including plastic drums, steel drums, fiber drums and multiwall bags. The firm has operations in the United States and Canada.