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January 27, 2020 12:07 PM

Silgan buying Albéa's dispensing business for $900M

Don Loepp
Plastics News Editor
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    Albéa Group

    A squeeze foam pack from Albéa Group.

    Silgan Holdings Inc. on Jan. 27 announced plans to buy Albéa Group's dispensing business for $900 million. The deal will expand and broaden Silgan's rigid packaging business.

    The dispensing business is primarily the former Rexam Personal Care business, which Paris-based Albéa bought in 2013.

    Private equity firm Sun Capital Partners Europe owned Albéa from 2010-2018, when it was sold to Paris-based PAI Partners.

    The Albéa dispensing business generated 2018 sales of $383 million. It makes pumps, sprayers and foam dispensing products for beauty and personal care customers. The business has 10 plants, located in North America, Europe, South America and Asia.

    Tony Allott, chairman and CEO of Stamford, Conn.-based Silgan, described the Albéa unit as "predominately a plastics dispensing business" with a relatively small amount of its sales generated from metal products.

    The business has adjusted earnings before interest, taxes, depreciation and amortization of $77 million, according to Silgan.

    Allott said the proposed deal will give his firm new products and capabilities in the highly engineered dispensing category, such as fine lotion dispensing solutions for skin care.

    "This is a business that we know well and that we've believed for some time that it's a great fit with Silgan," Allott said a conference call with analysts.

    Allott said the Albéa dispensing business is a "hand-in-glove" fit with Silgan's closures business.

    He said the deal will provide synergy opportunities of $20 million, through reductions in general and administrative expenses, manufacturing efficiency and savings on resin and metal purchasing. Allott said the businesses have significant geographic, footprint and customer overlap.

    "There's great manufacturing efficiency as we look at the geographic fit of the business," Allott said. The companies each make components that they can supply to the other, he said.

    Silgan, which is publicly traded, makes plastic and metal rigid packaging for consumer goods customers. The company posted 2018 sales of $4.4 billion. Silgan has 98 manufacturing facilities in North and South America, Europe and Asia.

    Its businesses include metal and plastic closures and dispensing systems, and plastic containers for shelf-stable food and personal care products.

    In response to a question from an analyst about sustainability, Allott said the Albéa dispensing business is well positioned because its products can be reused.

    "We think this business is incredibly well positioned for the sustainability argument because we are utilizing packaging many, many times," he said.

    Allott compared the Albéa deal to a similar acquisition that Silgan made in 2017: the $1 billion purchase of WestRock Co.'s specialty closures and dispensing business, formerly known as Calmar Inc.

    That acquisition included 13 plants in North America, Europe, South America and Asia making triggers, pumps, sprayers and dispensing closures for home, health and beauty products companies.

    Like the WestRock deal, the Albéa deal will be a carve-out: Silgan is not buying all of Albéa, only its dispensing business.

    Currently, Silgan generates about 14 percent of its annual sales from plastics packaging and 31 percent from closures, which includes both plastic and metal products. Following the acquisition, it estimates that it will generate 13 percent of sales from plastics packaging and 37 percent from closures. The remaining percentage is from metal containers.

    Silgan executives have been signaling for months that they were looking for acquisition targets, including in the plastics market. In an Oct. 23 conference call with analysts, officials said they had earned the right, thanks to a turnaround in business in recent years, to consider growth opportunities.

    Silgan ranks high on several of Plastics News' annual surveys of North American plastics processors: No. 10 in injection molding, No. 20 in thermoforming and No. 8 in blow molding.

    Silgan expects the Albéa deal to close in the first half of 2020. Jenner & Block and Linklaters LLP are representing Silgan on the deal.

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