Crown to Buy EMPAQUE, Fortifies Position in Beverage Cans - Analyst Blog


Crown Holdings, Inc. ( CCK ) has entered into an agreement to acquire Dutch brewer Heineken's Mexican packaging business, EMPAQUE for $1.225 billion. The acquisition will help Crown to expand its presence in the growing Mexican market and to fortify its global beverage packaging business, and is expected to contribute between 15 cents to 20 cents per share to Crown's 2015 earnings before synergies, but including estimated amortization and depreciation for purchase accounting adjustments.

EMPAQUE is a leading Mexican manufacturer of aluminum cans and ends, bottle caps and glass bottles for the beverage industry. The acquisition is expected to close by the end of this year pursuant to customary closing conditions, including competition authority approval.

EMPAQUE, which has a total workforce of 1,500 people, operates two beverage can plants, a plant that manufacturers beverage can ends, aluminum closures and bottle caps, a glass bottle plant and a glass service facility in Mexico. EMPAQUE has projected revenues of $700 million and EBITDA of approximately $150 million in 2014.  

The acquisition of EMPAQUE will significantly enhance Crown's strategic position in beverage cans, both in the domestic as well as international markets. With an annual supply of over 24 billion units to beer and soft drink customers, Crown will be catapulted to the position of the second largest beverage can producer in North America.  Globally, Crown will produce more than 62 billion beverage cans, accounting for 20% of the total beverage cans.  With this acquisition, Crown will also strengthen its industry-leading geographic presence, as over 50% of beverage can revenue will stem from the faster growing developing regions.  

In addition, Crown Holdings will benefit from its previous Mivisa acquisition, which will considerably improve Crown Holdings position in the European food can segment. The buyout will boost margins and is expected to be accretive to earnings in 2014. Moreover, Crown Holdings has embarked on a cost-reduction initiative to better align costs primarily in its food, aerosol and specialty packaging businesses, as a result of which approximately 235 employees will be laid off, in 2014. This will lead to an annual cost savings of approximately $25 million.

Philadelphia-based Crown is a leading supplier of packaging products to consumer marketing companies. The company manufactures aluminum beverage cans, food cans, aerosol cans and other packaging products.

Crown Holdings currently holds a Zacks Rank #3 (Hold). Some better stocks worth considering in the sector include Sealed Air Corporation ( SEE ), Ball Corporation ( BLL ) and, Graphic Packaging Holding Company ( GPK ). While Sealed Air holds a Zacks Rank #1 (Strong Buy), Ball Corporation and Graphic Packaging hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: SEE , BLL , CCK , GPK

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