In a potentially landmark move, Ball Corp. plans to sell its Plastic Packaging Americas business to Australian packaging giant Amcor Ltd. for $280 million. The deal will apparently make Amcor the largest blow molder in North America.
In a June 15 news release, Broomfield, Colo.-based Ball said the deal comprises five U.S. plants that manufacture PET bottles and preforms, and polypropylene bottles, as well as the factories' assets.
The transaction is expected to close during the third quarter of 2010, pending regulatory approval.
Ball also announced that its board of directors has authorized the repurchase by the company of up to a total of 12 million shares of its common stock.
Plastic packaging is our smallest business, Ball spokesman Scott McCarty said in a June 16 e-mail. It's a challenging industry and we believe the plastics business is better positioned to grow as part of a larger, global packaging company.
Assuming [the deal] does close, our packaging business which is 90 percent of our company would be entirely metal for the first time in Ball's 130-year history, he said.
The plants are in Ames, Iowa; Batavia, Ill.; Bellevue, Ohio; Chino, Calif.; and Delran, N.J.
The deal also includes research and development operations in Broomfield and Westminster, Colo.
This is an important strategic opportunity to further expand our position in the diversified products market. This is a high-growth market, and the capabilities of the Ball acquisition will help us expand our business in North America and to leverage new technologies and products in our growing Latin America business, Ken MacKenzie, Amcor's managing director and CEO, said in a June 16 news release.
In the current global economic environment, there are opportunities to acquire businesses at prices that are substantially lower than a few years ago, he said. The significant synergy opportunities this acquisition generates will underpin strong returns from the first full year and have a positive impact on earnings per share.
Melbourne, Australia-based Amcor in August grabbed a big slice of Alcan Packaging from London-based Rio Tinto plc. Amcor paid $1.9 billion for 80 plants for Alcan Packaging's global pharmaceuticals, global tobacco and European and Asian food packaging units.
Including the former Alcan businesses, Amcor reported about $14 billion in sales for 2009. It employs 35,000 at 300 sites in 43 countries.
Amcor on June 11 said it had received approval from the Department of Justice to acquire Alcan's medical flexibles business from Rio Tinto. The business consists of four plants in North America, in Milwaukee; Asheville and Marshall, N.C; and Commerce, Calif. To gain federal approval Amcor would initially acquire all four plants for $66 million on July 1, and then have to sell the Marshall facility.
According to a June 11 Amcor news release, the medical flexibles business has annual sales of about $115 million the Marshall factory accounts for $30 million.
According to recent Securities and Exchange Commission filings, Ball Plastic Packaging Americas employs about 1,000 and posted losses of $3.2 million on sales of $634.9 million in 2009. The unit posted losses of $5.4 million on sales of $113.9 million for the first quarter of 2010, compared with profit of $3.6 million on sales of $159.7 million for the year-ago period.
Parent Ball Corp. reported profit of $79.4 million on sales of $1.7 billion for the first quarter of 2010, compared to profit of $69.6 million on sales of $1.6 billion for the year-ago period. For full-year 2009, the company reported profit of $387.9 million on sales of $7.3 billion.
According to the filings, Ball estimates that Plastic Packaging Americas' 2009 shipments of 5 billion plastic bottles made up about 8 percent of total U.S. PET container shipments. Ball said the unit also shipped 625 million PP food and specialty containers in 2009.
Ball in recent years has made several strategic moves to trim costs and increase efficiency throughout its operations.
In October 2009, the firm sold its plastic pail assets to Bway Corp. of Atlanta for $32 million. The transaction involved the sale of an injection molding plant in Newnan, Ga., which Ball acquired in 2006 with its purchase of U.S. Can Corp. During 2008 and 2009, Ball closed plastic packaging plants in Baldwinsville, N.Y.; Watertown, Wis.; and Brampton, Ontario, and consolidated the operations into its other U.S. facilities.
McCarty said Ball made glass packaging from 1880 until 1996, and launched the plastic packaging division in 1994.
Ball has demonstrated that it wants to get out of the plastics business, said John Hart, plastics and packaging group director at P&M Corporate Finance LLC in Southfield, Mich. PET bottles and PP containers are a great fit for Amcor. Amcor is certainly expanding its global portfolio. In terms of plastic packaging, they're No. 1, right up there with companies like MeadWestvaco [of Richmond, Va.] or Rexam [plc of London], Hart said by telephone.
If Amcor isn't at the top of the heap, it's pretty close, said Ghansham Panjabi an analyst at Robert W. Baird & Co. in Milwaukee. Baird's research indicates that Tetra Laval International SA of Pully, Switzerland which includes Tetra Pak packaging, Sidel bottling and DeLaval dairy equipment divisions and Amcor are within a few million dollars of each other in sales.
The past year has seen a major increase in big packaging mergers and acquisitions, Panjabi said. He cited the Alcan Packaging acquisitions by Amcor; Neenah, Wis.-based Bemis Co. Inc.'s $1.2 billion acquisition of the Food Americas business of Alcan Packaging from Rio Tinto in 2009; and the three-way bidding war this spring between Apollo Global Management of New York (the owner of Berry Plastics Corp. of Evansville, Ind.), Georgia-Pacific Corp. of Atlanta, and New Zealand-based Rank Group Ltd. on Hefty bag maker Pactiv Corp. of Lake Forest, Ill.
This industry plastics packaging has surprised us because it's taken a long time to consolidate compared to some other industries. Based on the events of the past year, it looks like it's catching up pretty quickly, Panjabi said.
Cynthia Werneth, a research analyst with Standard & Poor's, said the ratings agency didn't consider Ball Plastics Packaging Americas to be a big enough portion of Ball Corp. to put out a note to investors.
[The unit] wasn't a really big earner in terms of a percentage. [Ball] bundled the announcement with one about share repurchases, so I would expect some of the [sale] proceeds to go towards that, she said June 16.
Ball stock traded as high as $55.22 per share on June 16, nearly matching the 52-week high of $55.65 per share set April 26 in the wake of the quarterly earnings release.
In Plastics News' most recent ranking of North American blow molders, Amcor Rigid Plastics ranked second, with estimated sales of about $2 billion. Graham Packaging Co. LP of York, Pa., ranked first, with annual sales of $2.2 billion. Ball Corp. ranked seventh on the same list.
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