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May 03, 1999 02:00 AM

ANC PLANS FOR PUBLIC OFFERING, WILL PASS PLASTICS TO PECHINEY

Michael Lauzon
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    American National Can Group Inc. plans to go public and exit plastics packaging to focus on metal cans.

    ANC will transfer its plastics business to its parent company, Paris-based Pechiney Group. The business, to be named Pechiney Plastic Packaging Inc., had film and blow molding sales of $827.2 million in 1998, according to a preliminary prospectus issued by ANC.

    In a separate announcement, Pechiney said April 27 that it bought Kenpak Inc. of City of Commerce, Calif., a producer of sterilizable medical packaging.

    Chicago-based ANC filed a registration statement April 21 with the Securities and Exchange Commission. It expects to complete its initial public offering by the end of the year but will transfer the plastics business before the IPO. Credit Suisse First Boston Corp. of New York will manage the IPO, which is valued at as much as $100 million.

    Making ANC a public company could free up capital for Pechiney to invest in plastics, according to analyst Tim Burns with Cranial Capital of Cleveland. Pechiney's recent purchase of Kenpak indicates it is serious about plastics' future, Burns said by telephone.

    Jean-Pierre Rodier, Pechiney chairman and chief executive officer, said in a letter to shareholders that spinning off ANC will help Pechiney grow more profitable.

    ``We intend to strengthen our positions both in aluminum, particularly in its conversion, and in food, health-care and beauty packaging,'' Rodier said.

    Pechiney Plastic will have 12 film plants, three blow molding facilities and a combination blow molding and film operation in North America. Last year it closed its Mount Vernon, Ohio, film plant.

    Pechiney Group directly owns 10 percent of ANC and the other 90 percent indirectly through holding company Pechiney North America Inc. ANC will transfer Pechiney Plastic to Pechiney Group for the latter's 10 percent direct stake in ANC.

    ANC faces a $102.4 million lawsuit filed by film producer Viskase Corp. for alleged patent infringement. In 1996, ANC's plastics business showed a loss before taxes of $130 million, much of it related to the Viskase lawsuit. Pechiney Plastic will indemnify ANC for any damages it is required to pay.

    ANC invested $70 million last year in its flexible packaging business alone, said Carol Constantine, vice president of communications. The firm replaced older machinery and upgraded controls and productivity. The operation makes a range of films, laminates and pouches. It also has a small thermoformed food-tray operation in its Neenah, Wis., film plant.

    Burns said now is a good time to float an IPO because packaging-company stock prices are high. Pechiney bought ANC in 1989. It never has been a star performer, and its growth prospects are low, Burns said.

    Pechiney's global plastic packaging business had sales of 723 million euros ($1.1 billion) last year. North America accounted for 74 percent of the total, and Europe, 17 percent.

    Recently purchased Kenpak has annual sales of about $30 million. Pechiney said it is the second-largest producer of sterilizable bags in the world. The deal included plants in Marshall, N.C., and City of Commerce. Earlier this year Pechiney bought a controlling interest in PET bottle blow molder Pet Plas Packaging Ltd. of Leeds, England. Pet Plas had sales of 20 million euros ($31.5 million).

    Pechiney's main packaging markets are food, meat, dairy and health care. It operates research centers in Neenah, Wis., and Voreppe, France.

    Last year, ANC converted its Cleveland film plant to mainly health-care production. It expanded its Bellevue, Ohio, bottle plant capacity by more than 50 percent, Pechiney noted in its 1998 annual report.

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