Pactiv Corp. has purchased Newspring Industrial Corp., plunging the packaging company into injection molding and broadening its expertise in the competitive world of thin-wall containers.
The acquisition enhances Pactiv's sprawling food-service segment, a business that Pactiv has penetrated with trays, clamshell packages and containers. Until now, Lake Forest, Ill.-based Pactiv had not made injection molded containers.
Pactiv already thermoforms similar containers for supermarkets, carry-out restaurants and delicatessens. Pactiv's current products are made of polystyrene; Newspring molds its containers from polypropylene, a material that currently costs less than PS.
``It's a signal to suppliers that Pactiv will look at other raw materials,'' said Ghansham Panjabi, equity analyst with New York-based Lehman Bros.
``It's not simple for Pactiv just to raise its prices, because the market is pretty efficient. Instead, the company can adjust to a lower-cost alternative over time.''
Others molding the thin-wall packages include Newell Rubbermaid Inc., Jarden Plastic Solutions, Rexam plc and HuhtamÃ¤ki Americas.
Demand for those containers is growing at a double-digit clip, Pactiv Chairman and Chief Executive Officer Richard Wambold said in a news release.
The purchase of Newspring, based in Kearny, N.J., was completed March 15 for $98 million in cash, analysts said. Newspring received about six times earnings before interest, taxes, depreciation and amortization, a healthy multiple that reflects Pactiv's desire to mold PP containers, Panjabi said.
Newspring was founded in 1993 by Jeffrey Chen, an artist and engineer. The company has manufacturing sites in Kearny; Mount Carmel, Pa.; and Mississauga, Ontario. The Mount Carmel site, its newest location, opened in 2002 in a site formerly owned by HuhtamÃ¤ki.
Chen did not immediately return a telephone call seeking comment. Pactiv said the company recorded 2004 sales of $60 million. Pactiv plans to retain the production facilities and Newspring's 250 employees, Pactiv spokeswoman Lisa Foss said March 16.
Newspring has been embroiled in several patent disputes with offshore companies during the past two years. In 2003, the U.S. Court of Appeals denied Newspring's motion for an injunction against two Asian companies that Newspring said were making food containers for Chinese restaurants similar in design to Newspring's Versatainer product.
A year later, the U.S. International Trade Commission launched an investigation into two Chinese companies that Newspring said infringed on its patents. ITC later ruled that no action was necessary against those companies.
The sale gives publicly held Pactiv 77 facilities in 14 countries. The company recorded sales of $3.38 billion in 2004 and is considered the largest thermoformer in North America.
Pactiv may continue to buy smaller food-packaging producers, part of a trend toward consolidation that was prodded by the recent purchase of Gillette Co. by Procter & Gamble Co., Panjabi said.
Other sources have told Plastics News that Pactiv actively is shopping its protective packaging and European flexible packaging businesses.