With its promise to diversify further in plastics, Sonoco Products Co. of Hartsville, S.C., has agreed to purchase custom blow molder Matrix Packaging Inc. for $210 million in cash.
The deal, subject to regulatory approval, allows Sonoco to expand into areas like personal care, household chemicals, and pharmaceuticals. The purchase includes six blow molding plants in the United States and Canada.
The transaction is expected to close by the end of June.
The addition of six blow molding plants essentially triples Sonoco's current blow molding footprint, Sonoco spokesman Roger Schrum said in a May 18 telephone interview. Sonoco currently operates a blow molding site in Wausau, Wis., and will open another site in Columbus, Ohio, by the end of the year.
Matrix Chief Executive Officer Pushminder Judge said the business will continue as it has operated. He will become a member of Sonoco's management committee. Matrix co-founder Graeme Malloch will not continue with the company.
Judge and Malloch founded the company in 1992, and brought in equity investor Tricor Pacific Capital Inc. in 2002. Tricor has offices in Vancouver, British Columbia, and Chicago.
``The addition of Matrix will transform our current rigid plastic container business, both in size and in scope, as we will have a better balance in serving both the food and drink and personal-care markets,'' said Harris DeLoach Jr., Sonoco's chairman, president and chief executive officer, in a May 17 news release.
``Matrix has grown rapidly in just 15 years by investing in state-of-the-art technology and advanced equipment that provide its customers with innovation, flexibility and quality,'' DeLoach said. ``By maintaining Matrix's talented management team, we expect to be able to continue to aggressively grow this business.''
Matrix is headquartered in Mississauga, Ontario, and has 860 workers. Sonoco expects it to contribute $140 million in annual sales. Matrix does monolayer and multilayer extrusion blow molding of polyethylene and polypropylene. It also injection stretch blow molds and injection molds; does silk screen printing, pressure-sensitive labeling and heat-transfer labeling.
The consumer segment is part of Sonoco's growth strategy, said analyst Ghansham Panjabi of Wachovia Capital Markets LLC in a May 18 telephone interview.
Matrix has grown at a double-digit rate during the past few years, Panjabi said, at very attractive operating margins. It boasts an earnings before interest, taxes, depreciation and amortization margin of at least 19 percent vs. 14 percent for Sonoco. The $210 million price tag is 7.5 to 8 times EBITDA.
Panjabi said it is likely that Sonoco will make additional acquisitions in the near term, likely in flexible consumer packaging.
Sonoco in December acquired privately held container manufacturer Clear Pack Co. in Franklin Park, Ill. Clear Pack thermoforms products for the food-service market at its plant in Franklin Park.
Now operated as Sonoco Clear Pack, that segment continues to perform well, Schrum said.
``We're working to expand that business'' in terms of looking to add additional customer base, he said.
Matrix operates two plants in Mississauga; and one each in Brampton, Ontario; Addison, Ill.; Chatsworth, Calif.; and Jefferson City, Mo.