A deal that would have created one of the largest packaging companies in the world has been called off, due to what one of the companies calls a technicality.
Alusuisse Lonza Group Ltd. cancelled its planned merger with Viag AG because the companies did not agree on how to value each firm's common stock.
``We started building personal relationships and started orienting the companies toward a combined company. A huge amount of time and effort has been put into it. Now it's just time to lick our wounds and get reoriented and move ahead,'' said Robert Kahn, director of communications for Alusuisse's Lawson Mardon division.
The deal would have created a global powerhouse in PET bottles, closures and flexible films, plus metal and glass packaging. Especially significant in North America would have been the combination of blow molding assets: joining Viag's Schmalbach-Lubeca Plastic Containers U.S.A. Inc. with Alusuisse's Lawson Mardon Wheaton Inc. unit.
In the end, the merger collapsed because Alusuisse wanted 35 percent of the merged company, but Viag offered only 32.5 percent.
``The monetary difference between 35 percent and 32 percent is about 1 billion Swiss francs (US$689 million),'' Kahn said in a telephone interview. ``We thought we should get a premium for giving up our Swiss headquarters.''
Viag is based in Munich, Germany; Alusuisse Lonza is in Zurich, Switzerland.
The deal started to unravel last week. On March 28, Alusuisse's board of directors met to discuss the proposal. Chairman Theodor Tschopp resigned from the board of directors in protest of the valuation, but the board decided to continue merger negotiations with Viag.
The next day, however, Alusuisse's board decided ``not to continue discussions with Viag on the merger using the proposed structure,'' according to an Alusuisse news release.
In November, when the deal first was announced, both companies had agreed that Alusuisse shareholders would get 35 percent of the new company. However, the jointly commissioned auditors boosted the valuation of Viag's operations, and left Alusuisse's valuation unchanged.
According to a statement by Viag Chairman Wilhelm Simson, Viag's board insisted on the new valuation ``in order that we may act fairly in terms of our responsibility to our shareholders.''
Alusuisse officials disagreed. ``This [assessment] is really meant for German companies merging with German companies, not a German company merging with a Swiss company,'' Kahn said. ``It's like comparing apples to oranges.''
He added that the firms walked away from the deal, not because executives didn't get along or because the two companies didn't fit well together, but because of a technicality.
``The two [chief executive officers] actually became quite close,'' Kahn said. Alusuisse does not intend to sit still. The company plans to continue growing internally and through acquisitions, he said.
Viag and Alusuisse's flexible packaging operations mainly convert paper, foil and plastic film, which they purchase. In those multimaterial markets, the combined companies would have made them the largest supplier in North America and Europe.
Schmalbach-Lubeca Plastic Containers U.S.A. Inc. ranked third in Plastics News' survey of North American blow molders with relevant sales of $629 million.
Alusuisse's Lawson Mardon Wheaton subsidiary ranked No. 12 with sales of $210 million.