Updated — Housewares major Newell Brands Inc. is expanding into the Southern Hemisphere through acquisition. Newell has agreed to buy Auckland, New Zealand-based Sistema Plastics, a leading supplier of innovative food storage containers with annual sales of about US$145 million.
The Sistema deal is unfolding while Newell looks for a buyer of its own food container business, which has been under attack for years by a host of competitors.
Sistema products are sold worldwide, including in markets where Newell's Rubbermaid brand storage containers are not currently available. Sistema is expanding in the fast-growing beverages category, a strategic area for Newell, according to a news release issued Dec. 12 by Newell.
Also attractive to Newell is Sistema's construction of a state-of-the-art manufacturing facility in Auckland that will help Newell match production capacity with anticipated growth.
Newell agreed to keep Sistema operations going in New Zealand, thus protecting the jobs of more than 700 Sistema employees, a key condition for the sale.
Sistema founder and managing director Brendan Lindsay said in a news release, “I am absolutely thrilled that Newell has agreed to keep manufacturing in New Zealand for the next 20 years at our recently opened 52,000-square-meter (500,000-square-foot) manufacturing facility at a green fields site near Auckland airport.”
“The new world-class manufacturing facility is a tribute to the fantastic efforts and talents of Brendan and his team,” noted Newell President Mark Tarchetti in a news release. “The plant's level of sophisticated automation will ensure its products remain internationally competitive and will help to significantly scale the business.”
Newell agreed to pay NZ$660 million (US$470 million) for Sistema. It expects to close the deal in the second quarter of 2017.
“Newell has the expertise and market access that will enable them to take the [Sistema] business to the next level and create new opportunities for the company, especially in North America,” Lindsay said.
Rubbermaid first approached Sistema in 2014 for a possible deal but at the time didn't want to commit to long-term job commitments in New Zealand.
“We have previously made approaches to the company and are delighted that we have been able to reach an agreement to purchase the business,” stated Tarchetti. “We plan to leverage our position as a Fortune 500 company to provide the platform for further growth for Sistema.”
Sistema, established 34 years ago, sells into more than 90 countries. Its product line includes stackable food storage containers, lunch boxes, drink bottles, microwave-proof containers and large storage goods. It claims to be a world leader in robotic technology for plastics processing. Its emphasis on automation has helped it compete internationally.
While Newell completes the Sistema deal, it is looking for a buyer of Newell's consumer storage container business within its Home Solutions segment. That container business is fighting price-point wars with many players big and small around the world. Food containers have become a commodity category and new rivals find it easy to join the market. Rubbermaid was a key player in the early stages of food container market development but it is now swamped by knock-offs entering the market from all directions.
Newell is in the midst of trimming its businesses to achieve a leverage ratio of 3 to 3.5 times earnings before interest, taxes, depreciation and amortization by the end of 2018. The program follows the consolidation of the recently acquired Jarden brands with its Rubbermaid brands.
Newell plans to jettison about 10 percent of its portfolio — representing about $1.5 billion in annual sales — as it pares down 32 business units to 16 operating divisions. Notable is the creation of a new, global e-Commerce division.
As part of the divestments Newell has agreed to sell its tools business — with annual sales of about $760 million — to Stanley Black & Decker for $1.95 billion. Other businesses on the block are Newell's winter sports goods, heaters, humidifiers and fans. It expects to complete the divestitures in the first half of 2017.