Silgan Holdings Inc.
) has entered into a definitive agreement to acquire Portola
Packaging for $266 million. Subject to customary closing
conditions, the transaction is scheduled to close in September.
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Headquartered in Naperville, Ill., Portola Packaging is a
manufacturer of plastic closures. It has eight plants in North
America and Europe and posted sales of about $200 million in
2012. Portola has also made a name for itself in closure design
innovation and operational leadership.
Last year, Portola exited the cosmetics market, closing plants in
Rhode Island and China. The company will now spend $12 million to
install new high-speed compression and injection molding
equipment, upgrade existing production lines and make
infrastructure replacements and upgrades at its plants in
Kingsport, Tenn., and Tolleson, Ariz.
Silgan, on the other hand, is a leading manufacturer of consumer
goods packaging products operating 81 manufacturing facilities in
North and South America, Europe and Asia. In North America,
Silgan is the largest supplier of metal containers for food
products and a leading supplier of plastic containers for
personal care products.
As, both companies are involved with the production of packaging
material for food and other products, this acquisition will
provide Silgan an opportunity to enhance its global closure
franchise. The deal will also help in expanding Silgan's small
European plastic closure, while providing a broader platform to
service its customers' market needs.
Silgan expects to fund the acquisition from a combination of cash
on hand and borrowings under the company's senior secured credit
facility. The acquisition is expected to be slightly accretive to
earnings initially, excluding the impact of the required purchase
accounting write-up of inventory as synergies are phased in over
the next 18 months.
Stamford, Conn.-based Silgan, which belongs to the containers
industry along with
Mobile Mini, Inc.
), reported its second quarter 2013 adjusted earnings of 63 cents
per share, up 15% from 55 cents earned in the year-ago quarter,
but missed the Zacks Consensus Estimate of 65 cents. Total
revenue increased 7% year over year to $880 million, beating the
Zacks Consensus Estimate of $862 million.
Revenues for the Closures segment, however, slipped 0.9% to $181
million, affected by lower beverage volumes in the U.S. as a
result of adverse weather conditions and significantly lower
sales in Venezuela due to political instability. Favorable
foreign currency partly offset the decline.
Silgan will benefit from its successful acquisitions, increasing
productivity and cost reduction initiatives, such as the newly
started Can Vision 2020. However, soft demand in Europe, a high
debt-to-capitalization ratio and lower volume expectation remain
Silgan currently retains a Zacks Rank #3 (Hold).