In a deal that unites one of North America's leading makers of flexible packaging with one of the largest thermoformers, aluminum giant Alcoa Inc. has agreed to buy Ivex Packaging Corp. for about $790 million.
Ivex is one of a handful of packaging companies seeking a buyer, and the premium price that Alcoa paid could be a signal that the acquisition market is heating up in 2002.
``A few of them are trying to cash in now while the prices are higher,'' said Gary Schneider, an equity analyst with Bear Stearns & Co. Inc. in New York. ``The stars are aligned right now. Inflation is down, the costs of raw materials are down and demand is reasonably good. It's not a funny accident that several companies are for sale.''
Among those exploring sales are Pembroke, Bermuda-based Tyco International Ltd., which is seeking buyers for its plastic film operations. Also, Philadelphia-based Crown Cork & Seal Co. Inc. has attempted to sell off its Constar PET blow molding business since at least last fall, according to several financial sources. Potential buyers including Ball Corp. of Broomfield, Colo., expressed some interest but have backed off, those sources said.
Stockholders of publicly traded Ivex, based in Lincolnshire, Ill., will receive $21.50 per share in cash, and Alcoa will pick up about $350 million in Ivex debt. The overall cost of the transaction, which is to close by the end of June, is about $790 million, according to Alcoa officials.
The sale price is about 7.7 times the earnings of Ivex, after deducting interest, taxes, depreciation, and amortization. That multiple inches toward the upper end of what Ivex, a maker of specialty plastic and paper packaging, could command for the company, Schneider said.
Alcoa became a flexible packaging force when it bought Reynolds Metals Co. in May 2000. Adding Ivex boosts Alcoa's flexible operations, since Ivex owns sheet and film maker Kama Corp. of Hazleton, Pa., a business that accounted for more of Ivex's sales in 2000 than did its thermoforming operation.
Alcoa now can offer a wider range of food-service products in both flexible film and containers, said Alcoa spokeswoman Joyce Saltzman.
Packaging has been a good place for investors to generate growth, said Deborah Douglas, managing director of investment banking firm Douglas Group of St. Louis. The industry, especially the food segment, is fairly recession-resistant, she said
Banks are more willing to lend money this year, especially to buy healthy companies, she said. That has attracted equity firms and others, she said. But a shortage of sellers exists.
``Suddenly, buyers are pretty hungry to get deals closed,'' Douglas said. ``Where two years ago, you might have had six buyers to every seller, today you see 12 buyers for every one seller. That pumps up the numbers a little bit.''
Alcoa won a contested bidding war for Ivex, according to several sources. One early bidder was Pactiv Corp., another maker of specialty plastic packaging. But that company dropped out of the bidding early, said Timothy Burns, president of equity firm Cranial Capital Inc.
Pactiv officials did not return a telephone call seeking comment.
Ivex fits well with Alcoa, said Saltzman. Ivex makes a variety of specialty plastics packaging, including clamshells, containers and box inserts for the food, electronics, medical and retail markets. Ivex and its 30 global plants will be folded into Alcoa's Richmond, Va.-based packaging operation, Saltzman said. Ivex has about 3,700 employees.
Ivex has been a healthy performer but needed a company with deeper pockets to continue its growth, George Bayly, Ivex chairman, president and chief executive officer, said during a March 19 briefing.
``It will function even better with a larger platform and as part of a business with a broader approach and reach,'' Bayly said.
The sale excludes Ivex's 48.2 percent interest in Packaging Dynamics Corp., a maker of paper and foil products. Those shares will be distributed to Ivex shareholders, and Ivex management plans to retain board positions with that company.
Meanwhile, at least three groupings of equity firms are interested in Tyco's plastics operation, earmarked by Tyco to be sold by the end of April, sources said. Those groups include a consortium from Bain Capital Inc., Blackstone Group and Thomas H. Lee Co.; another from Carlyle Group and Madison Dearborn Partners LLC; and a third from Clayton, Dubilier & Rice Inc. and Texas Pacific Group.
Tyco management reaffirmed March 19 that a deal still was on track. But its completion is far from certain, said several sources familiar with the negotiations.
Investment firms were conducting tours of Tyco plants starting late last week, sources said. What they find could influence the bid for the unit, sources said. Tyco officials have said they would like to fetch at least $3 billion.
