Berry Global Group Inc. expects to save much more money from its acquisition of Clopay Plastic Products Co. Inc. than the company previously believed.
The Evansville, Ind.-based company is out with an updated estimate of cost savings associated with the $475 million deal for the maker of breathable films, elastic films and laminates that closed in February.
Berry initially told Wall Street that the company expected to ultimately save $20 million annually in costs by combining the operations.
But now that figure is doubling to $40 million as Berry continues to integrate its latest acquisition.
Part of the savings is coming from the transfer of certain production to a lower-cost former Clopay facility in Brazil from other Berry locations, the company indicated.
Berry also looks at best practices from both companies following mergers to seek out cost savings, and that's certainly been the case here.
"The integration is going better than planned," CEO Tom Salmon said during a May 3 conference call to discussion quarterly earnings. "Proven by the positive volumes and earnings growth achieved during the quarter, the Clopay team has surpassed our initial expectations and has done a tremendous job executing the early stages of integration."
Berry, for example, is seeing savings in both materials and selling, general and administrative costs following the merger. SG&A costs are non-production costs that companies can typically trim following mergers as certain duplicative activities performed by both companies are integrated.
Material cost savings come as a result of the company buying more resin at better prices as a larger firm.
The company, Salmon said, "will continue to work on further cost reductions and identifying new business opportunities."
The Clopay acquisition is creating opportunities within Berry's Health, Hygiene, and Specialties division.
"As with past acquisitions, we are identifying the best assets and processes within the combined company," Salmon said.
"I'm pleased with the results to date with Clopay and even more excited about the future opportunities," he said.
Berry has built itself into an $8 billion firm in large part due to deal making. And while it is still digesting the Clopay deal, it signaled it will continue with its acquisitive approach.
"M&A, overall, is very attractive right now. There are many opportunities in what is a very fragmented market. Not only in North America, but around the world," Salmon said. "Our disciplined approach to identifying, acquiring and synergizing acquisitions is a core competency of our company. And what you see recently with the Clopay acquisition was a terrific example."