Following through on a promise made last year to shift into the plastic container market, Bway Corp. has agreed to buy North American Packaging Corp., a large player in injection molded pails and other containers.
After acquiring plastic pail and drum maker SST Industries Inc. in August, Bway officials said the move was only the first step in a plan to shift beyond its core business of metal containers.
North American Packaging, called Nampac, brings Bway a powerful plastics division. While SST recorded annual sales of about $30 million, Raleigh, N.C.-based Nampac ended 2003 with $220 million in sales for its containers, made of high density polyethylene.
Bway is one of North America's largest makers of industrial steel containers, with sales in fiscal 2003 of $551 million. The company plans to merge SST and Nampac into a separate business unit with the name Nampac Packaging Division. Tom Linton will be the operation's president and chief operating officer. Linton had served as vice president and general manager of Nampac's Western Division.
Bway and Nampac officials did not return several telephone calls seeking comment. In a written statement, Bway Chairman and Chief Executive Officer Jean-Pierre Ergas said the acquisition will be the linchpin in the company's product diversification plans.
The company used several sources to fund the Nampac purchase, announced June 1. New York-based equity firm Kelso & Co. and Bway senior management contributed $30 million to the acquisition, with the rest funded by an unspecified amount of bank debt. Kelso bought Bway in February 2003 and took it private, giving the company a quick shot of capital to help with growth plans.
The company also received a commitment letter for a new bank loan, contingent on the closing of the acquisition. The loan will be used to repay $90 million in credit that was reworked after Kelso bought the company.
Nampac has 10 facilities in North America, making it one of the largest makers of injection molded, rigid-sided pails on the continent. It also makes blow molded tight-head industrial containers, paint cans, plastic bottles and drums. The firm opened its 10th plant two years ago and has been adding equipment at its sites in the United States, Canada and Puerto Rico.
A management group bought the company from Adelaide, Australia-based Southcorp Ltd. in 2001 and moved its headquarters from Atlanta to Raleigh.
The firm employs about 1,200. Of Nampac's $220 million in sales, about $195 million came from injection molded products, according to Plastics News figures.
Larry McVicker, Nampac chairman and CEO, said the sale will help Nampac continue its expansion.
``It has always been our objective to pursue strategies which would allow Nampac to grow in terms of market penetration and profitability,'' McVicker said.
While the acquisition crystallizes Bway's position in plastic containers, the market is struggling with overcapacity and is dominated by a small group of large companies, said Peter Mooney, president of Plastics Custom Research Services in Advance, N.C.
Mooney, who has prepared studies of industrial blow molding and materials-handling systems, said the market is positioned for further consolidation, especially as manufacturing begins to pick up again.
``There is tremendous overcapacity that won't be played out for some time,'' Mooney said. ``But that means it's a buyer's market for companies [like Bway], who can get lower multiples for good companies.''
The steel container market that Bway has helped lead is suffering a bit from a lack of growth and a shift to other materials, Mooney said. ``I don't know how many new steel containers are being made,'' he said. ``Many of them are reconditioned.''