Groupe Sidel directors are recommending that shareholders accept an offer by Tetra Laval SA to buy the French maker of PET blow molding machinery and packaging equipment.
Sidel's March 26 announcement coincided with Tetra Laval's first public statements about its offer to buy Sidel for 1.7 billion euros ($1.61 billion).
According to the Sidel board, if the sale does go through, Sidel will become a stand-alone division within Tetra Laval.
The news marks an abrupt change in public comments by Sidel, based in Le Havre, France, and traded on the Paris Stock Exchange. Sidel officials steadfastly had denied that anything was going on with Tetra Laval for weeks, even as Sidel's stock price surged amid speculation about a deal. Trading in Sidel shares was halted at one point.
Tetra Laval, based in Laval, Switzerland, said its offer was 50 euros ($47.45) per share — a 52 percent premium over Sidel's closing price March 21, and a 32 percent premium over the average price during the past three months.
Tetra Laval is best known worldwide for its ubiquitous Tetra Pak drink boxes.
"Most importantly, our offer is driven by an industrial logic and enables us to provide the world's liquid-food producers with state-of-the-art plastics equipment," Tetra Laval Chairman Goran Grosskopf said in a news release.
Buying Sidel would bring Tetra Laval a major new presence in packaging machinery. Tetra's only plastics machinery business, acquired in recent years, is a small Dynaplast factory in Geneva, Switzerland, that makes injection stretch blow molding machines, according to Jorgen Haglind, vice president of communications.
Privately held Tetra Laval is a packaging giant with 24,000 employees worldwide and 2000 sales of 8.9 billion euro ($8.4 billion) — most of that from the Tetra Pak drink boxes. Sidel reported sales of 1 billion euros ($949 million) for 2000.
"Plastics for Tetra Pak is not a big thing today. It represents some 2 percent of Tetra Pak's turnover," Haglind said in a March 28 telephone interview.
Tetra Laval does produce some PET preforms and bottles, and plastic closures. The company also has a global alliance with Graham Packaging Co. LP to make high density polyethylene bottles, Haglind said.
Tetra Laval exited the flexible pouch packaging business about a year ago, he said.
Officials from Sidel did not return telephone calls for this story.
Sidel, once a darling of the Paris exchange, has seen its stock price fall 45 percent in the past year. Recent news reports in France and England said Sidel's stock was pumped up by the promise of Sidel's Actis technology, which adds a barrier coating to the inside of a PET bottle, for packaging beer.
Timothy Burns, a packaging analyst, said Actis faces increased competition from other barrier technologies. That competition and the fact that Sidel has been diversifying away from "pure blow molding" and into conveying and palletizing machinery has left Sidel less attractive to investors, he said.
"These were just symptoms of a company that was once very one-dimensional and in a market niche [PET] that was just growing exponentially. That's what investors love," said Burns, president of Cranial Capital Inc. of Williamsville, N.Y. "Quite frankly, people could see that Sidel was running out of gas."
Tetra Laval has its own PET bottle-coating technology, called Glaskin, which is undergoing field testing.
Haglind said Tetra Laval is willing to invest time and money to develop both Glaskin and Actis. He called Actis "absolutely" a commercially viable technology.
"It still has a way to go to become a commercial and mature product," he said. "I think that is what has been reported now as well. For sure, Actis has a promising future, but it will take a much longer time than was expected."
Despite a 17 percent increase in 2000 sales, Sidel's profit plunged 67 percent, to 24.3 million euros ($23 million). Sidel said operating profit margins declined in the blow molding and filling division and the engineering and conveying division.
Meanwhile, Burns is skeptical of Sidel's claims that it will maintain its own identity. He said Tetra Laval has grown by supplying complete packaging systems to beverage manufacturers.
"The thought here is, they're going to incorporate the Sidel technology into a complete turnkey operation," he said.
If Sidel ignores independent blow molding companies, Burns said, that could open up opportunities for smaller PET machinery suppliers.