Pactiv Corp. has signed an agreement to sell its polyethylene packaging business to a subsidiary of Tyco International Ltd.
Terms were not disclosed. Exeter, N.H.-based Tyco will inherit two of Pactiv's manufacturing facilities and the nonconsumer-packaging operations of three others, according to a company spokeswoman.
The transaction is scheduled to close 30 days from the Jan. 19 announcement.
Richard Wambold, chairman and chief executive officer of Lake Forest, Ill.-based Pactiv, said that by selling the "bottom-end" business, the company stands to strengthen profitability.
The business sold to Tyco consists solely of industrial and institutional packaging like can liners and waste bags, he said in a Jan. 19 telephone interview.
"We have been focusing our attention and resources on higher-profit, higher-growth businesses and putting cash into those businesses to improve the profitability of Pactiv," Wambold said. "We doubled profits this year, and we substantially improved cash flow this year — all from a focus on making sure we put money in businesses that are growing and giving us the best return.
"This particular business was on the bottom end of our portfolio."
The top-performing businesses, which Wambold said Pactiv has no intention of unloading, include most of its consumer products like Hefty-brand bags, food-service packaging and polystyrene foam products.
When the deal is complete, Tyco will own and operate Pactiv's polyethylene packaging facilities in Belleville, Ontario, and Macedon, N.Y., according to a Tyco spokeswoman.
Tyco also will acquire nonconsumer-packaging equipment and other related assets at facilities in Covington, Ga.; Jacksonville, Ill.; and Temple, Texas. Employees at those three facilities are to remain with Pactiv.
The spokeswoman did not specify the type or amount of equipment involved, or how many employees will be affected.
The assets sold to Tyco were a major part of the business that former Pactiv parent Tenneco Inc. acquired from Mobil Chemical Co. in 1995 for $1.27 billion.
At the time, the Mobil Plastics Division employed 4,100 at eight facilities — including the five involved in the Tyco deal.
The latest action should free Pactiv to employ other debt-reduction and growth strategies, Wambold said.
"We'll be buying businesses too," he said.
"When we were spun off [from Tenneco], we had a debt level of 60 percent. We've paid off over $400 million worth of debt this year, and we have a pretty good reserve to go out and make acquisitions."
Pactiv was sixth in Plastics News' ranking of North American film and sheet manufacturers, with $2.9 billion in corporate sales and $875 million in film and sheet sales.
Tyco's film division, Nantucket, Mass.-based Tyco Plastics and Adhesives Group, tied for the No. 4 position with $900 million in film and sheet sales. Tyco had corporate sales of more than $22 billion.
Tyco Plastics and Adhesives recently had been on a steady expansion track, having acquired other packaging film operations such as Mohawk Plastics Inc., Amcel Corp. and North American Plastics Corp. last year.