Owens-Illinois Inc. could be close to selling its PET container business to New York-based equity firm Blackstone Group, according to a July 6 news report in the New York Post.
If a deal is completed, Blackstone would integrate that business with one of its portfolio companies, plastic container producer Graham Packaging Co. LP of York, Pa., the Post reported. Blackstone has proposed paying $1.2 billion for the PET business, the story said.
Several other sources familiar with the sale confirmed to Plastics News last week that Blackstone was one of the companies considering buying Toledo, Ohio-based O-I's blow molded plastics business. O-I officials said in April that the company hoped to have a sale in place for that business by early in the third quarter, partly so it could fund a recent acquisition of BSN Glasspack SA, a French glass-bottle producer.
Other O-I packaging competitors, including Amcor Ltd., Ball Corp. and Rexam plc, had looked at the business in earlier stages of the sale but passed on it, according to those sources.
At one time, Amcor, a major PET bottle maker, had considered purchasing the operation with Graham and splitting parts of it, sources said. But Amcor declined to move forward, sources said. Several sources said that if Graham and Blackstone opt out, O-I may eventually spin off the business as a separate company.
The O-I business includes bottles made from PET and high density polyethylene, primarily used for consumer and food products, and beverage containers for fruit juices, teas, sports drinks and alcoholic beverages. Analysts have estimated the business to be worth about $1.3 billion in sales. It excludes the company's injection molded containers and closures.
Graham makes similar, customized containers to that of O-I's plastics business, also in HDPE and PET. O-I commands a large share of the PET container market in North America, a business that Graham might covet, according to the Post story.
Blackstone spokeswoman Natalie Riper said she was not aware of any ongoing negotiations, and O-I spokeswoman Sara Theis said she could not comment on the Post story. Theis added that she was hopeful that the sales process would be resolved soon.
Other analysts cautioned not to give the Post story too much weight. On the same day the O-I story broke, the newspaper published a front-page article predicting that presidential candidate John Kerry would choose U.S. Rep. Richard Gephardt, D-Mo., as his running mate. Later that same day, Kerry chose Sen. John Edwards, D-N.C., as his vice presidential choice.
From every indication by O-I, the sales process is still on track, said Liley Mehta, packaging analyst for New York-based credit research firm Standard & Poor's. However, Mehta warned against reading too much into the Post's speculations.
Equity analyst Ghansham Panjabi of New York-based Lehman Bros. said that O-I's stock price actually declined slightly the day that the Post story was released. That could have been caused by progress on a national asbestos litigation bill that would affect O-I, he said.
Potential investors also might have been scared off by the $1.2 billion price mentioned in the story and the fact that Blackstone was not buying O-I's HDPE business, he said. ``Some investors might have expected the business to sell for around $1.5 billion,'' he said.
Blackstone is the most obvious choice right now to buy the business, but that does not mean it will happen, Panjabi said.
After seeing his home copy of the Post - with Gephardt's picture and full page story on his selection as vice presidential candidate - Panjabi was leery of any prediction by the newspaper.
``I'm only looking at the stock price,'' he said. ``Otherwise, I don't know what to think of it.''