Silgan Holdings Inc.
) has signed an agreement to acquire the plastic thermoformed food
business of Rexam Plc. The transaction is valued at $250 million.
The plastic thermoformed food business offers thermoformed
packaging solutions such as retortable bowls and barrier trays to
companies dealing in packaged food and ready-meals worldwide. It
caters principally to the growing shelf-stable food packaging
The business is expected to generate sales of roughly $100 million
in 2012. Silgan expects the deal to be neutral to its 2012 earnings
and add modestly to its 2013 results. The deal is scheduled to
close in third-quarter 2012.
With this acquisition, Silgan will be able to expand its global
footprint in the growing food packaging market. Thus, the companies
existing primarily on wide product offerings will become
strengthened and diversified. Further, the technology involved
being cost effective, it will meet the exact requirements of the
shelf-stable food market at low costs.
Through acquisitions and organic growth, Silgan has increased its
overall share in the U.S. metal food container market to more than
Silgan's historical growth has primarily been driven by
acquisitions. However, the company's inability to identify suitable
targets at attractive valuations could impede its growth.
Moreover, Silgan's debt-to-capitalization ratio is a concern. Its
debt-to-capitalization ratio went up to 73.4% as of March 31, 2012,
from 67.7% as of December 31, 2011, and 71.1% as of March 31, 2011.
Its strategy to look for acquisitions will further aggravate the
Silgan is a leading manufacturer of consumer goods packaging
products operating 80 manufacturing facilities in North and South
America, Europe and Asia. In North America, it is the largest
supplier of metal containers for food products and a leading
supplier of plastic containers for personal care products.
The company also leads in providing metals worldwide, along with
composite and plastic vacuum closures for food and beverage
products. Silgan competes with
Crown Holding Inc.
Silgan retains a short-term Zacks #2 Rank (Buy). We have a
long-term Neutral recommendation on the stock.
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