Two leading European packaging players seem ready to take advantage of the financial troubles of cash-strapped global giant Crown Cork & Seal Co. Inc.
Rexam plc and Pechiney International SA officials admit they're attracted by the scent of the Philadelphia-based company's successful international health and cosmetic packaging business, which analysts say is up for sale.
But bids have been slow coming, in part because of potential legal liabilities related to an asbestos insulation business Crown Cork briefly owned in the 1960s.
Cork Cork announced plans to sell some assets back in March. London-based Rexam admits it has been offered the chance to buy the health and cosmetics operation, which includes plants in Europe and the United States. Crown Cork bought the business from CarnaudMetalbox in 1995.
The business on the auction block includes four injection molding plants run by Risdon-AMS (USA) Inc. of Watertown, Conn. That business is a prime target for Rexam, according to Per Erlandsson, Rexam's London-based communications director.
He confirmed Rexam was approached by bankers handling the Crown Cork asset sale and that Rexam has expressed an interest.
``They [Crown Cork] have a certain order for these things and are starting with the health and beauty operations. Health and beauty is a very attractive part of their business to us, especially the U.S. operations. Those would fit in pretty well with our business,'' Erlandsson said.
He would not discuss a potential price.
The timing of the offer could prove difficult for Rexam. The company is restructuring and has pledged to sell its nonpackaging businesses, as well as three beverage can plants in France, Britain and Germany, before it makes new acquisitions. The can plant sale is a European Union condition to Rexam's purchase of American National Can.
``We need to get our debts down to 1.4 billion (US$1.96 billion), which we expect to do by the end of this year. Whether that will fit in with the timing of Crown Cork & Seal, we don't know,'' Erlandsson said.
Rexam just announced the sale of its building and engineering subsidiary MiTek, a supplier of metal-based construction connectors and associated software. But Rexam still has to divest parts of its coated films and papers division.
Erlandsson admitted the asbestos issue is a possible sticking point.
``It doesn't make it any easier. I'm not sure if [the litigation] is affecting these businesses [we are interested in], but it is a matter for due diligence,'' he said.
Rexam already has successful cosmetics packaging operations in Europe, North America and Asia.
In Paris, a spokeswoman for Pechiney International confirmed that company has shown an interest in businesses up for sale. She said Pechiney is studying the business but added it is too early to comment further.
In London, packaging analyst Christian Georges at Credit Lyonnais Securities said Crown Cork's health and cosmetics operations are a natural fit for a number of big packaging players, including Pechiney and Rexam. It is clear both are taking an interest in the offer.
Crown Cork spokesman Tim Donahue said the company has not revealed yet which assets might be for sale.
A major injection molder of fragrance bottle caps and other packaging components, Risdon reported annual injection molding sales of $125 million. Risdon's plants are in Thomaston and Danbury, Conn.; Middletown, N.Y.; and Barrie, Ontario.
Crown Cork needs to sell assets to pay down the $2.5 billion in refinancing and a $400 million term loan that the company received in March.
Tim Burns, a packaging consultant with Cranial Capital Inc. in Williamsville, N.Y., noted the offers have been slow coming in to Crown Cork. He suspects the asbestos issue is causing market reluctance.
The company might do well to step up its sales strategy, he said.
``The process is dragging along,'' Burns said in a June 12 telephone interview. ``While Crown needs cash, they don't need to sell assets at discount prices. But if they don't sell something soon, they'll be in a pinch.''