Pactiv Evergreen Inc. says it is facing challenges brought on by the pandemic, inclement weather and labor shortages, but the acquisition of Fabri-Kal Corp. was too attractive to pass up. So Pactiv is buying Fabri-Kal in a $380 million acquisition that initially will add to its debt level, but then immediately help the new owner's bottom line.
Lake Forest, Ill.-based Pactiv Evergreen said Sept. 8 the purchase is expected to close late in the third quarter or early in the fourth quarter.
News of the purchase comes on the same day Pactiv Evergreen told the market not to expect as much profit from the company this year as previously anticipated.
But purchasing Fabri-Kal, the 11th-largest thermoformer in North America, according to Plastics News data, is expected to bring cost savings to the combined company.
Pactiv Evergreen is the largest thermoformer in North America, according to the latest PN ranking, with an estimated $2.6 billion in annual sales.
"The largest bucket of synergies is the operational synergies. We've taken a very close look at the Fabri-Kal facilities and the Pactiv Evergreen facilities and we think there is opportunity to get a lot more production out of both by combining the production footprint," said Mike Ragen, who serves as both chief operating officer and chief financial officer at Pactiv Evergreen. "I'm not saying closing plants when I say that. It's more about moving product around between the facilities.
"That's the bulk of it," he said.
A total of 72 percent of Fabri-Kal's business is in foodservice and the remaining 28 percent is in consumer products.