Rexam plc bought injection molder Precise Technology Inc. for $257.5 million Nov. 14, part of its strategy to bulk up in plastics and get access to North America's pharmaceutical and health-care packaging markets.
Rexam, the world's largest beverage can maker, bought the company from Chicago-based private equity group Code Hennessy & Simmons LLC.
The acquisition instantly gives London-based Rexam a much larger footprint in plastics, which made up a relatively small part of its £3.1 billion ($5.97 billion) in global sales, and in the United States, where Precise, with just under $300 million in sales, is heavily focused on health-care, personal-care and consumer packaging.
``Precise Technology provides an excellent entry for Rexam into the growing North American pharmaceutical and health-care packaging market, and will extend our capability for existing customers in this sector whom we have been supplying mainly in Europe up until now,'' Rexam Chief Executive Officer Lars Emilson said in a news release.
North Versailles, Pa.-based Precise has 15 plants in the United States and a facility in the Netherlands, and is in the final stages of constructing a factory in Poland. The company employs 1,700.
One industry watcher said the purchase shows Rexam is trying to expand its global presence in rigid packaging, and that it is looking at markets or customer relationships that have barriers to entry, like medical and pharmaceutical products.
For example, Precise has close relationships with some customers, adopting a system it calls customer-aligned production, a heavily automated process that closely integrates its manufacturing with theirs, said Thomas Blaige, chief executive officer of Chicago-based equity firm Thomas Blaige & Co. LLC.
``Rexam is looking for businesses where there is some sort of barrier [to entry] or some sort of relationship,'' said Blaige.
While Precise is well-known in U.S. injection molding circles, the company has experienced a difficult operating environment.
In May, credit rating service Standard & Poor's downgraded the company's debt, owing to weaker-than-expected operating performance, but Precise executives said it reflected tough conditions for the industry in general. News of the sale to Rexam prompted S&P to say it expected to raise the rating for Precise.
``For Rexam, our take is it diversifies the company a bit away from their dependence on beverage packaging,'' said Kyle Loughlin, team leader for S&P's chemical group, who said beverages accounted for 83 percent of Rexam's sales in 2004. Rexam claims it makes 25 percent of the 220 billion beverage cans made in the world each year.
Precise is a stable company that, while it was fairly leveraged, had a demonstrated a pretty good ability to pass on resin price increases, Loughlin said.
Rexam had made other recent moves in plastic packaging in the United States. In September, it paid $154 million for packaging firm Delta Plastics of Hot Springs, Ark.
Rexam said Precise's closure business complements its own, and said it anticipates benefits from Precise's two tooling operations. The deal is subject to regulatory approval, but Rexam said it anticipates closing by year-end.