Barely a week after selling its confectionery business, Huhtamaki Oy launched a bold US$974 million bid to acquire global packaging giant Van Leer NV.
Huhtamaki of Espoo, Finland, announced it has been in ``friendly and constructive'' talks with directors of Amstelveen, Netherlands-based Van Leer. Huhtamaki is considering whether the offer should be in cash or a mix of shares and cash.
The Finnish firm predicted the merged group would have sales of $2.8 billion with operations in 55 countries and leadership positions in several consumer and industrial packaging areas.
In a brief statement, Van Leer confirmed it has agreed to enter talks to study ``an unsolicited proposal'' from Huhtamaki.
Huhtamaki, formerly a confectionery firm with a packaging arm, has transformed itself in recent years by emphasizing its higher-margin food packaging business.
Today, Huhtamaki is a leading international player in ice cream container production through its Polarcup division. It molds plastic butter and spread tubs, dairy containers and lids, fresh produce trays, takeout delicatessen containers and plastic food service products. It employs 11,000 through operations in more than 35 countries.
Van Leer is one of the world's leading packaging companies with more than 140 operating companies in 47 countries and employs 16,000. Its industrial product range includes steel, plastic and fiber drums; intermediate bulk containers and closures.
Its consumer product range includes: printed flexible packaging, tubs and lids; metallized products; molded fiber products; specialty films and coatings.
Van Leer had 1998 worldwide sales of 4.48 billion Dutch guilders ($2.25 billion), derived almost equally from industrial and consumer markets. Its profit was 132.4 million guilders ($66 million), up 8.2 percent from the previous year.
Huhtamaki's pretax profit was down 10 percent to FM473 million ($84.5 million) on sales of 7.3 billion Finnish markkaa ($1.37 billion). Packaging sales rose 31 percent to FM4.2 billion ($785 million).
Analysts see the Huhtamaki bid for Van Leer as another example of the continuing consolidation of the ailing European packaging sector, which has seen signs of oversupply and less profitability in recent years.
``The message is that this is an example of the ever increasing onrush to consolidate in packaging. It is an essential defensive move by some players to ensure they survive,'' said Nicholas Spoliar, packaging analyst at brokerage house West L.B. Panmure of London.
He said a merger would bring together the groups' respective strengths in thin-wall plastic containers and food service products. The combined firm would be able to cut logistics, supply and distribution costs, he said.
Spoliar said Van Leer has been less profitable than Huhtamaki largely because of its involvement on a large scale in less profitable areas such as industrial packaging. He suggested that Huhtamaki might sell off the less profitable Van Leer metal drum business.
Spoliar expects to see more consolidation among European flexible packaging firms, following the recent failure of a proposed merger between Alusuisse-Lonza Group. Ltd. of Zurich, Switzerland, and Viag AG of Munich, Germany.
He added that a merger of Van Leer and Huhtamaki is logical because Van Leer was a loser when Danish producer Danisco A/S of Copenhagen snapped up Sidlaw Group plc of Edinburgh, Scotland.
In related news, Van Leer recently expanded in Australasia with its proposed cash purchase of Rexam Flexible Packaging of Auckland, New Zealand, for £8.6 million (US$14.1 million).
The business generated sales of about NZ$50 million (US$26.8 million), supplying printed and laminated polypropylene and other film packaging to the dairy, food, tobacco and medical industries in New Zealand and Australia.
The Rexam company, part of London-based Rexam plc, employs more than 200 and has manufacturing units in Auckland and Napier, New Zealand. More than 40 percent of the business's annual sales is exported, predominantly to Australia, according to Van Leer.
Van Leer said the acquisition will give it about a 25 percent share of New Zealand's flexible packaging market.