Amcor continues acquisitions

Amcor Ltd. (AMCR), the world's fourth-largest packaging company, continues to play an aggressive role in global industry consolidation, recently announcing that it will acquire Tobepal SA, the flexible packaging and extrusion operations of the Tobepal Group of Spain.

The transaction, which is subject to regulatory approvals, hands Amcor Flexibles Europe around 25 per cent market share in Spain and the chance to further build a presence in the high-growth healthcare packaging sector.

The acquisition price wasn't disclosed, but Melbourne -based Amcor said the purchase represents a multiple of 6.2 times earnings before interest, tax, depreciation and amortization.

One Sydney -based packaging analyst estimates Amcor will pay between A$70 million (€41.7 million) and A$75 million for Tobepal, hardly putting a dent in the company's A$1 billion-plus war chest.

Amcor Chief Executive Russell Jones told Dow Jones Newswires the company's purchase of Tobepal, along with last month's A$30 million acquisition of two U.K.-based food flexible packaging plants from Rexam PLC (U.REX), won't crimp the pace of management's expansion strategy.

"These two acquisitions are not large. They're certainly very strategic, but they don't take away our capacity to do more,"​ Jones said.

He noted that the still-fragmented flexible packaging industry in Europe offers further acquisition opportunities.

"But we're always interested in any of the regions that we're involved in - Australia , Asia, Europe and North America,"​ Jones said in an interview.

Tobepal SA operates three plants in Spain and has combined annual sales of A$ 122 million, almost half of which are drawn from the pharmaceutical and cosmetic markets.

Jones said the plants are an excellent strategic fit with Amcor Flexibles Europe, possessing complementary technology, particularly in extrusion lamination.

"Both technically and geographically, it is a strong fit with our businesses in southern Europe, and strategically it gives us an increased market share in the lower-cost region of Europe," he said.

"The acquisition price of 6.2 times EBITDA, together with the anticipated synergy benefits, gives us confidence that our target of a 15 per cent return on funds employed will be achieved by year three," Jones added.

He told Dow Jones Newswires that annual synergy benefits to be drawn from Tobepal will likely be in the order of 3.5 per cent to four per cent of the operation's A$122 million revenue base, consistent with the level of annual synergies being extracted from Amcor Flexibles Europe.

Amcor Flexibles Europe was created in mid-2001 following a three-way merger of assets with Danish food retailer Danisco A/S (K.DNS) and Sweden 's AB Aakerlund & Rausing. The business leapfrogged Alcan Inc. (AL) to become the biggest European packaging company when measured by sales.

The Sydney -based analyst said the Tobepal price "looks pretty okay. The multiple is higher than Amcor paid for Rexam in the U.K., but it's justified because Tobepal has higher profitability and it also gives greater exposure to the high-growth healthcare sector."

Amcor's annual sales base of A$7 billion is evenly split three ways across Australasia, Europe and the Americas, with a small portion coming from Asia.

Analysts like this geographic diversity, as well as the defensive bias in Amcor's businesses.

Around 80 per cent of the group's sales base is sourced from food and beverage packaging - a segment that tends to be more resilient in tough economic times.

Last week, Amcor provided a quarterly trading update, which showed net profit for the quarter through March rose 18 per cent on year, and climbed 9.3 per cent for the first nine months of fiscal 2001-02.

Most eye-catching was Amcor Flexibles Europe, which delivered a 218 per cent surge in earnings before interest and tax for the nine months ended March 31 , with restructuring benefits now feeding through to earnings.

Analysts expect Amcor to deliver a 2001-02 net profit of around A$260 million.