Novolex, the world's largest plastic bag maker, is continuing to diversify into other plastics products.
And this time it can thank Newell Brands Inc. which is embarking on a massive downsizing of its own plastics holdings.
Newell announced May 4 that it is selling Waddington Group, a maker of disposable food packaging for markets such as bakeries, delis and restaurants, for about $2.3 billion.
The buyer is Hartsville, N.C.-based Novolex, which is owned by investment firm Carlyle Group.
The sale marks the first major divestiture by the consumer products giant, which is looking to sell a number of businesses — including Rubbermaid — and dramatically remake the company. In its first quarter report, also issued May 4, Newell added two additional companies to its list of planned divestitures.
Novolex expects the deal to close in about 60 days. Reuters had earlier reported that Novolex was the high bidder in an auction for Waddington, which is based in Covington, Ky.
Stan Bikulege, chairman and CEO of Novolex, said his company has had Waddington in its sights for some time.
"This is a period of strategic growth and development at Novolex," he said in a statement. "Adding rigid plastic food packaging and an expanded range of sustainable packaging products have been key strategic priorities, and the Waddington Group has long been our top acquisition target."
Novolex was previously known as Hilex Poly, its unit that makes grocery T-shirt bags. But the company has been on an acquisition tear, buying eight companies since 2012, diversifying into paper bags, food-grade and retail packaging, can liners and other products.
One of Waddington's product lines, Eco-Products, makes food service items from renewable, compostable and post-consumer recycled materials. Waddington runs 16 factories and employs about 3,000 people at plants in the United States, Canada, Ireland, the Netherlands and the United Kingdom. After the deal is concluded, Novolex will have 62 factories and about 10,000 employees.
Waddington is the No. 14 thermoformer in North America, according to Plastics News data.
Equity for the acquisition is coming from Carlyle Partners VI, a $13 billion buyout fund.
Waddington was purchased by Jarden Corp. for $1.35 billion in mid-2015. The following year, Newell bought Jarden to create a massive $16 billion company. But the mega deal has run into some problems, and Newell Brands announced Jan. 25 that it was looking to sell several companies to dramatically cut its global factory and warehouse space, as well as its customer base. The company's stock price has plunged since the merger.
Other major plastics operations on Newell's selling block include Rubbermaid's housewares and outdoor products, Goody hair brushes and combs, Process Solutions, Mapa, Spontex, Quickie cleaning brushes, Rawlings and U.S. Playing Cards.
The Novolex sale kicks off Newell calls its "accelerated transformation plan." In Newell's first quarter report, officials said proceeds from the sale will be used to pay down debt and buy back shares.
Newell is traded on the New York Stock Exchange. The goal is to restructure Newell into a more than $9 billion company with brands in seven core consumer divisions.
After the restructuring is complete, Newell officials say the company will have 66 percent fewer factories, 55 percent fewer distribution centers, 45 percent fewer brands and 39 percent fewer employees.
Newell added that the restructuring will allow it to reduce its number of enterprise resource planning (ERP) systems from more than 30 to just two by the end of 2019. The company is moving to more e-commerce, reacting to a changing retail environment.
Newell reported first quarter sales of $3 billion, a decline of 7.6 percent in the year-earlier period, which the company said was largely attributed to the negative impact of divestitures. Core sales declined 3.5 percent.