Bemis Co. Inc. has struck its second major flexible packaging deal in two months by announcing the planned purchase of the Walki Films division of European paper maker UPM-Kymmene Corp.
The acquisition hands the Minneapolis-based company a major presence in Europe - more so since Bemis' announced purchase of DuPont's Clysar shrink-film unit in late June.
Until now Bemis had only small facilities in Europe, said Melanie Miller, spokeswoman and assistant treasurer. Bemis is the largest film maker in North America.
``Bemis has not been a very good global brand,'' Miller said on Aug. 21, the date the deal was announced. ``In Clysar, we got a global brand name. Now, we have the opportunity to work more on that and get some of our technology to Europe.''
Bemis will pay $70 million in cash for Walki Films, a major producer of high-barrier, nylon shrink film for meats and cheeses. The company recorded sales of 123 million euros ($120.4 million) in 2001, according to a UPM release, and has plants in Valkeakoski, Finland, and Epernon, France. Walki has about 500 employees, Miller said.
The deal, scheduled to close in the fourth quarter, might not be the last for Bemis in the near future, said Jeffrey Curler, Bemis president and chief executive officer, in an Aug. 21 conference call to analysts. In a separate transaction, Bemis sold its pressure-sensitive materials business, called MACtac, to UPM for $420 million.
That business, representing a little more than 20 percent of Bemis sales, gives its more cash to hunt for acquisition opportunities, said flexible packaging consultant Kyle Rossler of Applied Business Solutions in Williamsburg, Va.
Bemis will net about $235 million after the two deals are finished, most of which will be used to retire debt, Curler said.
``They're a well-run company that will be one of the survivors in five to 10 years,'' Rossler said. ``The [Walki] acquisition fits nicely, and Bemis has a lot of good technology in the United States that can go to Europe. They should continue to be very active.''
In Europe, Bemis will be more competitive in a highly fragmented market, said analyst Ghansham Panjabi of New York-based Lehman Bros. Several other large packaging players, including Amcor Ltd. and the Cryovac division of Sealed Air Corp., have made recent acquisitions in Europe.
``This opportunity gives us some scale and new technology,'' Curler said. ``We can add some existing products that we have in North America in Europe.''
Bemis currently does not sell high-barrier film to the food market in Europe, Miller said. Its European plants make film for such products as shrink bags and films and medical-device packaging, she said.
UPM, based in Helsinki, Finland, is a world leader in paper packaging, with sales last year of about 10 billion euros ($9.79 billion). The Walki division, started by the company 20 years ago, was a small piece of the company that did not fit with its existing business, Curler said. Profit margins were low, inspiring some concern from analysts during the conference call.
``It's a very small piece of UPM, and they didn't look at the business unit to carry the profit load,'' Curler responded.
``Redefining the product offerings they bring to the party will allow us to improve margins fairly nicely.''
The question is where, and how, Bemis will proceed next with acquisitions. With interest rates low and cash flow fairly strong, the company would be better-suited to buy another operation than to hold onto its money, Panjabi said. The company may look to expand in high-end films. High-barrier films, including those in the Walki purchase, account for about half of Bemis' sales, he said.
``They'd like to convert customers more from the commodity end to the middle- and high-end products,'' Panjabi said.
Bemis also is well-positioned, compared with some of its competitors, to go after other companies, said Thomas Blaige, managing director of Chicago-based Lincoln Partners LLP.
One large film competitor, Tyco International Ltd., is reeling from a recent management scandal, while Cryovac is facing an asbestos lawsuit that could hamstring the company, Blaige said.
``Bemis has a window now to pick off whatever they decide to go after. It's a less competitive field,'' Blaige said.
``It's still a very profitable time for Bemis,'' Miller said. ``Most of our packaging products are sold in the food industry. It's a pretty stable place to be. Even when the economy is soft, food gets eaten.''