Bemis paying $1.2 billion for Alcan Packaging assets
July 6, 2009
According to the Associated Press, Bemis Co., which makes plastic packaging that grocers use to wrap steaks and cheeses, will pay $1.2 billion in cash and stock for the U.S. packaging business of Rio Tinto PLC and become the world''s dominant player in that market. The acquisition boosts Bemis'' share of the global food packaging market from 57 percent to 70 percent at a time when rivals are struggling under a worldwide recession. The deal for the assets, known collectively as Alcan Packaging Food Americas, includes 23 facilities in the U.S., Canada, Mexico, Brazil, Argentina, and New Zealand. The business had sales of $1.5 billion last year and 4,600 employees. The move is the latest by Rio to reduce its debt, which is about $23.9 billion after raising fresh capital last week through a share issue. Rio incurred significant debt in its 2007 purchase of Canadian aluminum giant Alcan Inc. for $38 billion. Bemis, which reported a total debt of $617.4 million at the end of the first quarter, said it would borrow $1 billion and issue $200 million in stock. The Neenah, Wis., company recently had about 103.3 million shares outstanding. Bemis said the deal would boost its net sales by 40 percent to some $5.3 billion annually. It will have more than 20,000 employees and 84 manufacturing facilities worldwide. The deal is expected to close late this year. Bemis said it expects to retain its investment-grade bond rating and use its "strong free cash flow to support diligent debt repayment." Layoffs are likely, as the company said it expects synergies of $65 million. So far in 2009, Rio Tinto has announced a total of $3.7 billion of asset sales, including its interest in an aluminum smelter in China, Brazilian iron ore operations and a coalmine in the United States.