SOUTH HACKENSACK, N.J. (Sept. 27, 10:30 p.m. ET) — Film manufacturer AEP Industries Inc. has agreed to acquire the assets and some liabilities of Webster Industries, a privately-held blown film extruder and converter of retail and institutional private-label food and trash bags.
According to South Hackensack, N.J.-based AEP, the cash transaction is valued at $28.4 million, subject to a post-closing working capital adjustment.
Brendan Barba, chairman, president and CEO of AEP, said the deal allows the company to enter a new market with significant cross-selling potential.
"The private-label market continues to thrive, and with a stronger, more diversified portfolio of products, we will be able to build on our success in the plastics industry and create additional long-term value for our shareholders,” he said in a news release.
AEP expects to achieve significant cost savings, primarily from improved resin purchasing, as a result of the deal, he said.
“About 50 percent of our business goes into food service [packaging],” Paul Feeney, AEP's chief financial officer, said in a telephone interview, “There are some manufacturing synergies. We think that this [acquisition] is a horizontal move for us.”
Feeney said he could not discuss specific numbers related to the Webster acquisition until the deal closes.
Webster, a division of Chelsea Industries Inc. of Peabody, Mass., has operations in Montgomery, Ala., in a plant with 250,000 square feet of production space and 400,000 square feet of warehouse that employs 700.
Founded in 1957, Webster had sales of $145 million in 2010. Webster's product lines include food storage and freezer bags, and trash bags and can liners.
“Webster and AEP share a successful history, and this transaction will strengthen both organizations. We look forward to our future as a part of AEP,” Jack Shields, president of Webster, said in the release.
The transaction is expected to close in two to three weeks. AEP said it plans to finance the deal through a combination of cash on hand and availability under its revolving credit facility.
AEP makes an extensive range of polyethylene, polypropylene and PVC packaging films for the consumer, industrial and agricultural markets. The company has 12 plants in the United States and Canada and employs about 2,000.
For the third quarter of 2011, AEP reported after-tax profit of $2.5 million on sales of $246 million, compared to profit of $3.7 million on sales of $204.9 million for the year-ago period.