In a move that further cements the company's position as an aggressive buyer in the packaging market, Berry Plastics Corp. has agreed to purchase Kerr Group Inc.
The agreement, signed May 6, gives Evansville, Ind.-based Berry a larger foothold in a diverse range of packaging products, from food containers to tamper-evident closures to squeeze-tube bottles.
It also will boost sales at Berry past $1 billion - the company recorded sales of $814.2 million last year, while Kerr's sales are estimated at about $360 million.
The deal combines two long-time injection molders that had competed at times in closures and containers. Berry will pay $445 million, including existing debt, and the deal is scheduled to close within 60 days.
``I think this is very good for our company and Berry as well,'' Kerr President and Chief Executive Officer Richard Hofmann said in a May 6 telephone interview.
Equity firms on both sides of the transaction dictated the deal.
Kerr, based in Lancaster, Pa., has been owned since 1997 by Fremont Partners, a San Francisco-based investment firm. Fremont decided the time was right to sell and recoup its investment, Hofmann said.
Fremont had considered selling Kerr in 2000 and 2002, but pulled back each time, said Louis Mitchell, managing director with Chicago-based Mesirow Financial Inc. Instead, Fremont opted for greater growth.
That was achieved in 2003, when Kerr made a stunning deal to buy the packaging operations of spice-making giant McCormick & Co. The move handed the closures maker a blow molded container business known as Setco Inc., and a tubing package group, Tubed Products Inc. The transaction doubled Kerr's sales overnight.
Berry changed equity ownership in 2002, when affiliates of Goldman Sachs & Co. and JP Morgan invested in the growing company. A year later, Berry made a huge acquisition of its own when it bought Landis Plastics Inc., an injection molder and thermoformer. Berry's core products include open-top containers, aerosol caps, drink cups and housewares.
On a related note, Greg Landis, former president of Landis Plastics and now a Berry executive, announced his retirement effective at the end of May. Landis said in a news release that he plans to assist with the business for the next 18 months as a consultant and to remain on the Berry board of directors.
``The integration [of Landis Plastics into Berry] has been completed, and the new, combined company is running quite well,'' he said.
Kerr fills in gaps in Berry's product lines, adding specialty features such as child-resistant closures, bottles for pharmaceuticals and ``neutraceuticals,'' and squeeze tubes, said Ira Boots.
The bidding was fairly intense for Kerr, which was shopped by Deutsche Bank.
``We recognized that there was a lot of interest in the property, and we moved accordingly,'' Boots said. ``As our [owners] have said, it makes us one of the leading franchises for plastics packaging.''
Kerr will bring 2,200 employees to Berry, as well as eight plants and a technology center in Lancaster. Currently, Berry has 17 sites and 4,700 employees, Boots said.
After the sale is completed, Berry's management team must evaluate Kerr's facilities and look at integration opportunities, Boots said.
The purchase helps Berry reach a goal set by associates of Goldman: to reach $1 billion in annual sales. Berry is achieving that objective in three years instead of the five suggested by its ownership group, Boots said.
Analysts have speculated that Berry's next move might be an initial public offering. Boots declined to comment on that possibility.
``They're starting to build the attributes needed to go public,'' said Mesirow's Mitchell. ``They were borderline before but they've made some synergistic acquisitions that make them a good candidate.''
Hofmann, a former Continental Can Co. executive, took over the helm at Kerr in 1997. The 64-year-old said he may retire, but wants to discuss his situation with Berry management first.