Australian packaging giant Amcor Ltd. has become an even larger flexible plastics behemoth by snagging parts of Alcan Packaging from Rio Tinto plc for a little more than $2 billion.
Melbourne-based Amcor will pay about US$2.03 billion for Alcan Packaging Global Pharmaceuticals, Alcan Packaging Food Europe, Alcan Packaging Food Asia and Alcan Packaging Global Tobacco. Those units will add about US$4.1 billion in sales and 14,000 employees across 80 plants in 28 countries.
According to an Amcor news release, the deal fits with the firm's plan to grow its flexible packaging and folding cartons businesses.
While these are difficult economic times globally, Amcor is in a solid financial position, said Amcor Managing Director and CEO Ken MacKenzie. We made the tough decisions several years ago to reshape our company through focus and discipline. This acquisition is a clear fit with our strategic growth plans, building greater shareholder value by expanding our business whilst obtaining the economies of scale that comes with an opportunity such as this.
We believe Amcor's offer is in the interests of all stakeholders, Rio Tinto Chief Financial Officer Guy Elliott said in an Aug. 18 news release. These businesses would be acquired by a leading player in the global packaging sector that is very well-placed to enable ongoing success of the businesses.
Rio Tinto is a global mining and exploration firm based in London. Selling off the Alcan packaging business was a condition of Rio Tinto's $38 billion, all-cash purchase of aluminum giant Alcan Inc. in 2007. Rio Tinto earlier this year sold the Food Americas business of Alcan packaging to Bemis Co. Inc. of Neenah, Wis., for $1.2 billion.
Roughly 80 percent of the plants involved in the current deal are in Europe, Amcor spokesperson Shelley Steele said Aug. 20. The Food Europe and Food Asia units are mostly plastic and focus on products such as pouches and film. The Global Pharmaceutical business has a rigid container operation that makes prescription medicine bottles and similar products, but accounts for less than half of the unit's sales, she added. The Global Tobacco unit has very little plastic content.
The acquisition is subject to regulatory approvals and is not expected to occur for several months. A market source said Amcor and Alcan already held the top two positions in European food packaging and in global tobacco packaging even before the deal.
The transaction is believed to include the following Alcan Packaging Food operations :
* Ten plants in France.
* Seven plants in China.
* Three plants per country in Italy, Switzerland and Thailand.
* Two plants each in Germany and Indonesia.
* Single plants in Australia, the Czech Republic, India, Ireland, Morocco, New Zealand, Poland, Portugal, Russia, Singapore, Spain, the Netherlands, Turkey and the United Kingdom.
Based on that list provided by an industry source 44 of the 80 plants acquired would make food packaging. Sources said most of the food and pharmaceutical units involved in the deal have strong plastics operations. The tobacco operations mostly don't involve plastics, but were described by one source as a gold mine.
What you had here was a buyer [in Rio Tinto] that needed to sell, said an industry executive with knowledge of the deal. They didn't need the business.
The executive said Amcor may not hold on to all of the plants it's acquiring, in part because some of them may overlap with existing Amcor sites.
The Amcor-Alcan sale price represents a multiple of 5.3 times pretax earnings, which is less than the 6.7 multiple Bemis paid for Alcan assets earlier this year.
Industry sources said that gap could be explained by the tighter focus and higher productivity levels of the Alcan Food Americas business acquired by Bemis.
Based on data supplied by Rio Tinto, the plants acquired by Bemis generated an average of $65 million each in annual sales, while those being acquired by Amcor generate $50 million each.
Amcor offers plastic, fiber, metal and glass packaging. The company operates in 34 countries with 226 sites and 21,000 employees.
In its fiscal 2009, ended June 30, Amcor rang up sales of just under US$8 billion up 2 percent vs. fiscal 2008. The firm's pretax profit increased almost 2 percent to US$912 million in the same comparison.
Packaging industry consultant Peter Schmitt described the Amcor-Alcan deal as a major milestone in the ongoing consolidation of health-care packaging.
It continues the move from selling materials like aluminum or polymers to selling value in areas such as flexible films, barrier, printing, security or intelligence, said Schmitt, who's managing director at Montesino Associates LLC in Wilmington, Del.
It's remarkable that in less than one year the two traditional aluminum companies in North America Alcoa and Rio Tinto/ Alcan have exited packaging, to be replaced by companies that sell flexible packaging films and that focus on profitable value-adds.
It will be interesting to observe whether this change is cyclical or permanent, he added.
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