Suiza Foods Corp., a newcomer to the blow molding industry, will be among the largest bottle makers in North America with its purchase of Continental Can Co. Inc.
Dallas-based Suiza on Jan. 15 signed a definitive agreement to acquire Continental Can for $345 million in stock, assumed debt and transaction costs.
``It makes sense from the pricing and consolidation standpoint,'' Michael Lewis, Suiza vice president and treasurer, said in a telephone interview.
Suiza entered the plastics field last year with its $400 million purchase of Garelick Farms Inc., a Franklin, Mass., dairy and water bottler.
``We wanted to have a partner,'' said Donald Bainton, Continental Can chairman and chief executive officer. ``Suiza is a nice fit for the existing plastic operations.''
Suiza, which views itself as a consolidator, will operate Continental Can as a subsidiary. The acquisition is subject to approval by the shareholders of Continental Can and regulatory review. The companies do not anticipate any problems and expect to complete the deal in mid-April.
Suiza said the purchase furthers its strategy to ``expand its plastic packaging operations and gives the company a leading position in the high density polyethylene segment of the plastic packaging industry.''
The Garelick plastics operations, now renamed Franklin Plastics Inc., operate 16 blow molding facilities and had 1997 sales of about $115 million, Lewis said. It supplies PET and HDPE containers to the water and dairy industries.
Domestically, Continental Can's Norwalk, Conn.-based blow molding subsidiary, Continental Plastic Containers Inc., operates 15 facilities with 111 machines. The parent company, also based in Norwalk, employs 1,800 and serves the beverage, food, medical, personal-care and chemical markets.
In Plastics News' North American Blow Molders ranking, CPC placed ninth, with sales of $268 million for the year ended Dec. 31, 1996. The parent company reported sales of $585 million. Sales for the most recent fiscal year, ended Dec. 31, are expected to be about $530 million.
The merger will more than double Suiza's blow molding sales, to about $400 million, Gregg Engles, Suiza chairman and chief executive officer, said in a news release.
``Internationally, Continental Can's operations provide us with a number of opportunities to further develop our packaging business,'' he said.
Continental Can runs nine European plants that make plastic film and food cans.
The European operations will be kept for now, Lewis said.
``We'll look at it and assess whether or not we can operate those facilities better and optimize their value. If not, we'll consider [divesting them],'' he added.
``There are minority interests in those operations and we will do nothing with them until June 1999.''
Bainton stressed that it would be a deliberate decision.
Since the Franklin Plastics purchase, Suiza and Garelick's former owners, Alan and Peter Bernon, have been looking for additional plastic industry acquisitions. Both Suiza and Continental Can were working with Donaldson, Lufkin, Jenrette Inc., a New York investment banking firm.
Bainton said Continental Can had looked at financial institutions and private groups for additional funds for acquisitions and growth. In fact, Continental Can stated in its second quarter report that it intended to ``actively pursue acquisition possibilities in 1997.''
One analyst said the deal is indicative of the state of affairs in plastics packaging.
``There has been consolidation and trading of assets in the industry,'' said George Staphos, analyst and first vice president at PaineWebber in New York. The trend suggests that industry fundamentals are changing, he said. ``Consolidation will continue.''
The Continental Can purchase will increase Suiza's packaging sales to about $645 million this year.
Under the agreement, Continental Can shareholders will receive 0.629 share of Suiza stock for each of the 3.2 million Continental Can shares outstanding. Suiza also will assume about $187.5 million in Continental Can's debt.
Suiza's principal holdings are in plastic containers, milk, packaged ice and food products. The company employs about 7,100. Both Suiza and Continental Can trade on the New York Stock Exchange.