Transit and protective packaging giant Signode Industrial Group Holdings Ltd. is being sold by Carlyle Group to Crown Holdings Inc. in a nearly $4 billion deal.
Carlyle, a private equity firm, acquired the firm only in 2014 when Illinois Tool Works Inc. sold off the operations for $3.2 billion. The latest sale price is $3.91 billion.
Signode supplies transit packaging consumables and equipment. Offerings include strap, stretch and protective packaging.
The Glenview, Ill.-based firm has 93 operations in 40 countries and sells products in about 60 countries.
While many acquisitions relying on combining operations and cutting costs to help create savings, Crown CEO Timothy Donohue sees this move differently.
"This is not a synergy play. This is a business with tremendous growth opportunities," he said on a conference call to discuss the deal.
"We think it's fair to say that anyone who really knows Signode, they are best in class when it comes to transit packaging," Donohue said.
"This is a business which is a platform for us to grow. We're not trying justifying this acquisition on the back of saving three accounts payable people. That's not what this is about. This is about growth," the CEO said.
The deal is expected to close during the first quarter of next year and will require regulatory approval.
Signode dates back to 1913 and was acquired by ITW in 1986. In 1988, the company developed a closed-loop system to recycle used polyester strapping.
The purchase for Crown, which is known for its metal container business, marks a return to plastics. The company was once the largest blow molder in North America, when it owned Constar International Inc., a PET container maker. Those operations were spun off into a separate company in 2002 by the company then known as Crown Cork & Seal Co. Inc. Constar then had years of financial problems before eventually being acquired by Amcor Ltd. in a deal announced in late 2013.
"Clearly this is a very exciting opportunity for Crown. The proposed acquisition of Signode not only enhances cash flow, earnings and shareholder value, but also provides Crown another platform for future growth," Donohue said.
Signode's customer base is diverse in terms of both geography and industries served.
"If you believe in the prospect of general worldwide economic growth, this business is extremely well positioned to benefit from that growth. The acquisition is consistent with our strategy to be a leading global packaging company," the CEO said.
Christopher Manuel is a senior analyst covering Crown for Wells Fargo Securities LLC. He had this to say in comments issued shortly after the deal was announced:
"While we understand the strategy to employ low-cost capital as a means to create long term value, valuation appears full and the business could add an element of cyclicality that was negligible prior to the proposed deal," Manuel said in a research note.