International mining conglomerate Rio Tinto plc of London has sold off the last of its Alcan Packaging business.
In a July 5 news release, Rio Tinto said that Melbourne, Australia's Amcor Ltd. bought Alcan's medical flexible business for $66 million and that Alcan's beauty packaging division was acquired by Sun European Partners LLP a London subsidiary of Boca Raton, Fla.-based Sun Capital Partners for an undisclosed sum.
Alcan's beauty division employs about 8,000 and operates 26 plants in 12 countries. It had $932 million in sales in 2008.
The medical business deal, which consists of four North American plants with $115 million in sales, completes Amcor's acquisition of the Alcan Packaging pharmaceuticals, tobacco, Food Europe and Food Asia divisions.
Amcor has been a very aggressive consolidator in the packaging industry. For several years they struggled because of a lack of focus, Ghansham Panjabi, an analyst at Robert W. Baird & Co. in Milwaukee, said in a July 6 telephone interview. They really seem to be making a calculated bet on plastics packaging. I'm not sure how long it will take for the investment to bring returns, but it's creating a situation where [in the packaging supply chain, companies] will have to go to Amcor they're that big now.
Packaging giant Bemis Co. Inc. of Neenah, Wis., in March acquired Alcan's Food Americas division for $1.2 billion.
David Evatz, a director in the investment banking group at Stout Risius Ross Inc. in Chicago, noted in a July 8 phone interview that Exopack Holding Corp. of Spartanburg, S.C. a Sun Capital Partners portfolio company recently bought two former Alcan packaging film plants from Bemis for $81 million. Bemis was required to sell the facilities to win federal regulatory approval of its Food Americas acquisition.
A lot of the fairly large plastic packaging companies have a lot of cash on the balance sheet, as well as incremental borrowing capacity, Evatz said. Those two things combined give those groups an advantage when attractive transactions come into the marketplace, vs. smaller groups or private equity firms that may not have the capital to pay a premium for a deal, or would not necessarily drive as many synergies.
The divestiture of Alcan Packaging by Rio Tinto to several strategic buyers is a sign of the times, where consolidation is the rule in packaging and all major manufacturers, regardless of industry, are refocusing on their core competencies, Evatz said.
The problem with [plastics packaging] is that it's fragmented globally, Panjabi said. As a result, U.S. and Western European packaging firms have missed out on some sales opportunities in Asia and in developing markets, he said. The U.S. industry has struggled because the pricing pendulum is toward the customer level, but now, due to industry consolidation, it's swinging back the other way, Panjabi said.
Since 2008, Rio Tinto has received more than $10 billion from the sale of assets. The money has been used to reduce the debt involved in the 2007 purchase of Montreal-based Alcan for $38 billion, in which Rio Tinto beat out Pittsburgh-based Alcoa Inc.'s $33 billion bid. Rio Tinto sold the packaging assets to focus on its core mining business.
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