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July 01, 2013 02:00 AM

Amcor buys Chinese flexible packaging operations

Kate Tilley
Correspondent
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    MELBOURNE, AUSTRALIA — Global packaging manufacturer Amcor Ltd. will buy Jiangsu Shenda Group Co. Ltd.'s flexible packaging business for 350 million yuan (US$57 million).

    The agreement is subject to regulatory approval and other conditions, and is expected to be finalized “in the coming months,” an Amcor statement said.

    Melbourne-based Amcor manufactures PET beverage containers; flexible packaging for the food and healthcare markets; tobacco packaging; and corrugated boxes. It also has recycling operations.

    Packaging manufacturer Jiangsu Shenda Group has more than 20 core subsidiaries and production bases in Nanjing, Jiangying, Changzhou and Chengdu. Its main products include biaxially oriented polypropylene film, PET film and coextruded film.

    The group's flexible packaging business has annual sales of about 440 million yuan (US$71 million) and two plants in eastern China's Jiangsu province. Two-thirds of its sales are to the pharmaceutical, snacks and culinary end markets.

    Amcor's statement said the purchase price represents eight times the business's earnings before interest, taxes, depreciation and amortization for the year that ended Dec. 31.

    Amcor managing director and CEO Ken MacKenzie said Jiangsu Shenda Group's flexible packaging business is a strong fit with Amcor's existing plant in Jiangsu province and enables sharing of overhead; optimization of production across the sites; and operating improvements through sharing best practices. Those opportunities are expected to deliver cost synergy benefits of more than 5 percent of sales.

    “Continued strong growth in consumer spending makes China one of the most attractive markets globally,” MacKenzie said. “This acquisition establishes Amcor as the market leader in eastern China, a region that represents [about] 40 percent of China's gross domestic product.”

    Following the acquisition, Amcor now has nine plants in the Chinese flexible packaging market, and annual sales of more than A$400 million (US$366.8 million).

     

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