CCL Industries Inc. plans to diversify its plastic label operations by acquiring the shrink- and stretch-sleeve label business of Illinois Tool Works Inc.
Toronto-based CCL said Jan. 10 it has agreed to buy the ITW business for about C$105 million (US$89.3 million) in cash. It expects to close the deal by the end of January.
Shrink and stretch labels are becoming more popular because they conform to a range of package shapes, offering new package design opportunities. ITW makes shrink sleeves from PVC, PET and oriented polypropylene. Stretch sleeves are based on low density polyethylene. The business also installs sleeve-application machinery.
ITW makes shrink-film sleeve labels in Kings Lynn and Castleford, England, for the European and North American markets. ITW produces stretch-film sleeves in Vlkermarkt, Austria, and in Crici£ma, Brazil, for Europe and North and South America. The Brazilian operations include a sales, service and distribution arm that supplies North America through ITW Auto-Sleeve in Twinsburg, Ohio.
CCL Chief Financial Officer Steve Lancaster said in a telephone interview that his company has had only a small stake in shrink-sleeve labels through production in Robbinsville, N.J. By contrast, the ITW business had shrink- and stretch-label sales of about C$87 million (US$74 million) in 2006.
``Shrink and stretch sleeve labels offer a flexible, full-body form of decoration which is particularly effective for the highly shaped containers used in the premium food and beverage and the home and personal-care segments of the market,'' CCL President and Chief Operating Officer Geoffrey Martin said in a news release.
``The combination of CCL Label's sleeve product line with those of ITW will make us one of the global leaders in a fast-growing segment of the label industry,'' he claimed.
Lancaster said the ITW plants are near existing CCL facilities in England, Europe and Brazil but CCL has no near-term goal of consolidating operations. Although ITW and CCL share many label customers, the ITW units also will bring new clients to CCL.
One analyst agreed the deal is a good fit for CCL
``Labels are more than 60 percent of CCL's business,'' estimated Robert Silgardo, an analyst with Dundee Securities Corp. of Toronto.
``There is a lot of label knowledge at CCL. And there is not much customer overlap.''
Silgardo said in a telephone interview that CCL's purchase price seems fair and in line with similar deals in the past.
``[The divested business] wasn't part of our core business in consumer packaging,'' said ITW spokeswoman Alison Donnelly in an interview from ITW's head office in Glenview, Ill. ``It had a slower growth rate than what we typically like to see in our portfolio.'' ITW bought the British operations in 2000 and the Brazilian operations in 2003.
ITW runs numerous packaging-related businesses. Plastics-intensive units focused on consumer products include Valeron Strength Films; Zip-Pak and Minigrip resealable packaging; and Richmond Technology laminates.
CCL's label business includes pressure-sensitive types, shrink sleeves and in-mold labels. Its other major business segment is plastic tubes and aluminum containers.