In an all-cash, $3.6 billion deal, Owens-Illinois Inc. has agreed to buy BTR plc's packaging businesses, which include Continental PET Technologies Inc.
The transaction, subject to the sanction of BTR's shareholders and regulatory approvals, is scheduled to close in the second quarter. When it does, the acquisition will make O-I the largest blow molder in North America, with related sales of roughly $1.1 billion.
The deal also gives O-I its first international plastics operations.
``BTR's worldwide glass and plastic packaging operations are an outstanding fit with our existing business,'' Joseph H. Lemieux, O-I chairman and chief executive officer, said in a news release.
``This is a major step in our strategy to expand our international glass and plastic packaging business, extend our global presence, increase our operating margins, maintain our technological leadership and continue supporting our major industrial customers as they expand their businesses worldwide.''
BTR's packaging business had 1997 sales of $1.5 billion and, pro forma for the acquisition, estimated profit before interest, taxes and unusual items of $305 million.
``We are very pleased with the price we have achieved for our packaging businesses, representing a multiple of over two times sales,'' BTR CEO Ian Strachan said in a statement about the sale.
London-based BTR plans to divest all of its nonengineering businesses by the end of the year.
With estimated sales of $600 million, Continental PET of Florence, Ky., placed No. 3 in Plastics News' 1997 North American blow molders ranking. It operates eight plants in the United States and employs about 850.
``In plastics, BTR's Continental PET unit is the leading supplier of PET containers for products which are hot-filled, such as certain foods, juices and other beverages,'' Lemieux added.
The remaining BTR plastic manufacturing plants are in Australia, New Zealand, China, Brazil, Mexico, the United Kingdom, the Netherlands, Hungary and Saudi Arabia. Also part of the sale is the company's ACI subsidiary, based in Melbourne, Australia.
ACI's plastics operations include ACI Closures; Blowpack, a PET blow molding company; and Petalite, a plastics recycling company.
In China, the PET operations include an 80 percent interest in Beijing Great Wall Plastics Co. of Beijing and a 70 percent share in ACI Qingdao Plastics Packaging Co. Ltd. in Qingdao.
``With the acquisition of BTR's operations in Australia and New Zealand, we will have a well-established base from which to expand in the Asia-Pacific region,'' Lemieux said. ``To date, BTR has made only minor investments in that region's emerging markets. Long-term, we expect the region to show significant growth in glass containers and plastic packaging.''
O-I manufactures plastic containers, closures, prescription containers, labels and multipack carriers for beverage containers. Its Owens-Brockway Plastic Products subsidiary in Toledo, Ohio, placed fourth in Plastics News' 1997 ranking of North American blow molders, with estimated sales of $550 million.
It runs 21 blow molding plants, nine closure and specialty products plants and one prescription product plant in North America.
O-I has said it plans to keep the Continental PET name intact.
``This is very smart for O-I,'' said Peter Weggeman, president of Directions 21 in Sarasota, Fla. ``It is an excellent move — both parties benefit. What O-I acquired in Continental PET is some of the very finest technical teams in the world.''
The transaction will be financed initially by bank borrowings. As of Dec. 31, O-I had total debt of about $3.4 billion. This includes about $643 million in publicly traded debt securities, with the remainder comprising borrowings under the firm's bank credit agreement.
In 1997, O-I's international operations accounted for roughly 36 percent of total sales. Following the acquisition, O-I's international business is expected to contribute nearly half of the company's sales.
Toledo-based O-I reported sales of $4.7 billion for the year ended Dec. 31. The deal would give O-I sales of around $6.5 billion this year, ranking it among the top five packaging companies in the world.
The deal with BTR could cause competition problems on the glass packaging front. BTR's ACI Glass Packaging unit includes Rockware Glass — a main competitor with O-I's United Glass Ltd. Each holds about 30 percent of the glass container market in the United Kingdom. BTR currently operates 13 glass container plants around the world using O-I's technology and equipment.
O-I claims to be the largest manufacturer of glass containers in North America, South America and India and the second-largest in Europe.
Since 1991, O-I has acquired 10 glass container companies and eight plastic packaging operations, not including the BTR units.