Europe's flexible packaging industry, now dominated by the newly merged giant Viag/Alusuisse, has begun reorganizing to close a big gap opened up by their Swiss-German rival.
The newest deal: Danish food and flexible packaging company Danisco A/S is paying L106.4 million ($172 million) for Scottish film extruder and flexible packaging converter Sidlaw Group plc.
The deal, subject to approval from Sidlaw's shareholders, should be concluded by around the middle of April, said John Durston, chief executive officer of Edinburgh, Scotland-based Sidlaw.
Meanwhile, Copenhagen, Denmark-based Danisco said it is preparing for further expansion as far as North and South America and the Asia-Pacific region.
Danisco serves four sectors: food and beverage, sweeteners, food ingredients and packaging. The last is divided between subsidiaries Danisco Pack, which makes paperboard-based products, and Danisco Flexible, a leader in multilayer barrier films and laminates.
Danisco Flexible has operations in France, Spain, Portugal and Denmark.
Sidlaw, a producer of high added-value flexible packaging with plants in Britain, France, Spain and the Netherlands, reported a pretax profit of L8 million ($13.3 million) on sales of L154.5 million ($256 million) for the year ended Sept. 30.
In the last year, Sidlaw had sought acquisitions in Europe to expand its operations and become a major regional player. It is currently negotiating a L40 million ($65 million) deal to buy a German film converter.
But Sidlaw finally concluded it could not raise sufficient capital as an independent company and went in search of a suitable merger partner.
``It was just not possible for us to make the quantum leap to grow in scale to meet the demands of European markets,'' Durston said. The packaging industry is not sufficiently attractive to raise additional funds for bigger acquisitions, he explained.
The group found two European groups ``with suitable management and geographical fit,'' and Danisco offered the higher price, Durston said. He firmly denied analyst and British press suggestions that U.S. packaging firms — including Atlanta's Printpack Inc. and Bryce Corp. Inc. of Memphis, Tenn. — were suitors for Sidlaw.
He said Sidlaw's decision was partly driven by the state of the European flexibles industry, with ``one very large leader'' with sales of L750 million-L900 million ($1.21 billion-$1.45 billion) and the rest trailing far behind, with the highest at no more than 200 million pounds ($323 million).
Sidlaw will be integrated into Danisco Flexible, according to a joint statement from the companies. Danisco Flexible has 11 operating units in Europe.
Danisco's packaging sector reported an operating profit of 335 million Danish kroner ($50 million) in the year to April 1998 on net sales of DKr5.7 billion ($850 million). It plans to retain and integrate Sidlaw's management and work force.
Sidlaw Finance Director Ian Bodie will join Danisco Flexible's senior management. Durston, who steps down as CEO, will stay on to assist in the integration. Danisco has no plans to reduce Sidlaw's total work force of 1,400, according to Durston.
