According to several sources, Rexam plc is considering selling its closures business, including assets the company acquired in its 2007 buyout of Owens-Illinois Inc.
A source in the closures unit of the London-based company, who spoke to Plastics News on condition of anonymity, said Dec. 13 that employees were informed that an internal audit recently identified that business as ripe for divestiture.
Employees were told that an external audit will be conducted in the first quarter of 2011 to determine the feasibility of a sale, the source said.
In a Dec. 13 telephone interview, Rexam Americas spokesman Greg Brooke confirmed that the parent company is exploring options, including the potential sale of its beverage and specialty closures assets.
As soon as we have made decisions on [our] next steps, we'll inform our people and customers. In the meantime, we remain focused on customer satisfaction and strengthening the business for the future, he said.
Brooke would not give specifics of the company's actions. He said the closures unit that is being discussed covers beverage and specialty closures and does not include its high-barrier food-container operations.
Rexam's business units are Beverage Can and Plastic Packaging, which includes Closures, Personal Care and Healthcare divisions. One analyst, who covers large-scale mergers and acquisitions and who spoke to Plastics News on condition of anonymity, said Dec. 3 that London financial group Barclays plc would handle the sale of one-third of Rexam's closures business, and that the listing would occur in the first quarter of 2011.
Brooke would not comment on the analyst's statement. Rexam in February announced the closing of its Constantine, Mich., closures plant, which it estimated would result in savings of £2 million ($3.2 million) in 2010 and £5 million ($7.9 million) in 2011.
The closures unit has been an underperformer for Rexam in recent years, posting negative numbers for all of 2009 and the first half of 2010. Most recently, although sales increased due to resin price pass-throughs, volume dropped 9 percent for the first half of 2010 vs. the year-ago period. The company blamed the decrease on soft demand for beverage closures.
In a Nov. 16 news release, CEO Graham Chipchase acknowledged that demand for closures had remained soft year-over-year.
For the first half of 2010, Rexam reported underlying profit before taxes of £198 million ($314 million) on sales of £2.49 billion ($3.95 billion), compared to underlying pre-tax profit of £135 million ($214 million) on sales of £2.5 billion ($3.96 billion).
Rexam bought Owens-Illinois assets in 2007 for $1.8 billion. The move catapulted Rexam into the top position in the U.S. for pharmaceutical packaging and closures production.
Rexam increased sales from £4.6 billion ($7.3 billion) in 2008 to nearly £4.9 billion ($7.7 billion) in 2009, but its underlying profits before taxes declined from £328 million ($517 million) to £285 million ($449 million).
Plastic Packaging accounted for 26 percent of the company's sales in 2009 and 30 percent of its underlying operating profit, and appears to be on track for similar performance this year.
The company will release full-year 2010 financial results on Feb. 23.