Pactiv set to expand
packaging specialist Pactiv is about to expand its business with a
series of strategic acquisitions.
Two years after first going independent, and now debt-free, US packaging specialist Pactiv is about to expand its business with a series of strategic acquisitions, according to a report from Crain's Communications.
Just last week the company agreed to pay $66 million (€66.7m) for a 70 per cent stake in Mexico-based disposable-cup manufacturer Central de Bolsa. Back in June the company shelled out another $72.5 million to buy another US food packager, Winkler Forming.
Industry observers believe that there is room for more deals to come, and the company's estimated spending power is put at a further $300 million, to spend on what CEO Richard Wambold describes as "bolt-on" acquisitions.
"We are trying to look for businesses that fit with the . . . kind of products we bring to the market," Wambold said.
Wambold's strategy would appear to make sense in what is traditionally termed by analysts as "a slow-growth industry", where acquisitions - as well as product development - are a way to boost sales, said Stewart Scharf, an analyst at New York-based Standard & Poor's.
"It's a way of increasing their marketshare," Scharf commented.
Originally part of the Tenneco Group, Pactiv was spun off as a stand-alone company in 1999 - burdened with about $2.1 billion in debt.Since then, the company has sold off about $600 million in assets and unprofitable businesses, including aluminum foil plants and its stake in Lake Forest-based Packaging of America, and used the proceeds to reduce debt. In June the company's half-yearly results revealed that its debts were down to $1.2 billion.
Through the first six months of the year, Pactiv's net income dropped 71 per cent to $30 million, as sales slipped 2 per cent to $1.38 billion.
Pactiv is looking to acquire companies with $50 million to $300 million in sales that will quickly be accretive to its earnings, Wambold said. Such deals are less risky because the acquired companies are in similar businesses, with products that can be sold through Pactiv's existing distribution system, he said.
"Really, what we're acquiring is the plant and the know-how," Wambold said.
With the Central de Bolsas deal, Pactiv hopes to gain access to the Mexican market and bolster its cup business, which posted $20 million in revenues last year. In addition to a majority stake in Central de Bolsas, the deal gives Pactiv the right to acquire the rest of the company.
