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 bags for food and trash.
“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.”
The cash transaction is valued at $28.4 million, subject to a post-closing working capital adjustment, according to a Sept. 27 news release from South Hackensack, N.J.-based AEP.
“This is an exciting opportunity for AEP, as it allows us to enter into a new market with significant cross-selling potential,” Brendan Barba, chairman, president and CEO of AEP, said in the release.
“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,” Barba said.
AEP expects to achieve significant cost savings, primarily from improved resin purchasing, as a result of the deal, he said.
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 space. It employs 700 there.
Founded in 1957, Peabody-based Webster had sales of $145 million in 2010. Webster's product lines include food-storage and freezer bags, 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,” Webster President Jack Shields 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 U.S. 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 with profit of $3.7 million on sales of $204.9 million for the year-ago period.