Credit: Shutterstock photoGlass container maker, Owens-Illinois, Inc.OI has completed the acquisition of the food and beverage glass container business of Mexican company, Vitro, for $2.15 billion. This deal will give the company a competitive edge in the attractive and growing glass segment of the packaging market in Mexico, further solidifying its position as the world's leading glass container producer.
Vitro is the largest supplier of glass containers in Mexico and manufactures glass containers for diverse end uses, including food, soft drinks, beer, wine and spirits. The acquired business will add annual revenues of $945 million and adjusted EBITDA of $278 million. Owens-Illinois expects to realize approximately $30 million in run-rate cost synergies by 2018 through both procurement savings and operating efficiencies. The transaction is expected to be accretive to cash flow and earnings per share in 2016. Owens-Illinois anticipates that in the third year after closing, earnings per share accretion will reach approximately 50 cents per share.
The deal involves Vitro's five food and beverage glass container plants in Mexico, a plant in Bolivia and the food and beverage business of Vitro Packaging, its North American distribution business based in Plano, TX with a total workforce of around 6,000 people. The current management team of Vitro's food and beverage glass container business will remain in place following the acquisition.
This is another notable deal in the packaging industry following the announcement of Rock-Tenn Company's merger with MeadWestvaco Corporation to form WestRock Company WRK in January. This collaboration is touted to be one of the major deals in the paper packaging industry as it will create the second-largest U.S. packaging company worth $16 billion, trailing only International Paper Company, which has a market capitalization of nearly $22 billion.
Apart from the Vitro acquisition, Owens-Illinois will benefit from the agreement with Constellation Brands Inc. STZ , European asset optimization program and share repurchases. However, unfavorable foreign currency translation, slowdown in beer demand in North America and weak demand in South America, will hurt the company's growth.
Owens-Illinois currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the sector is Sealed Air Corporation SEE , which sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
SEALED AIR CORP (SEE): Free Stock Analysis Report
OWENS-ILLINOIS (OI): Free Stock Analysis Report
CONSTELLATN BRD (STZ): Free Stock Analysis Report
WESTROCK CO (WRK): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
