Alcan, the Canada-based aluminium packaging specialist, has reached a non-binding agreement in principle with Norsk Hydro to purchase VAW Packaging (FlexPac) for approximately €345 million.
In a press statement, Alcan said that "the proposed acquisition adds good value and represents an excellent platform for profitable growth. It would significantly enhance the company's global position in packaging, expanding its footprint technologically and regionally, particularly in the developing markets of Asia. Alcan would have world-class flexible packaging operations in Europe, Asia and the Americas."
FlexPac, which includes 14 plants in eight countries and 5,400 employees, posted consolidated sales of €637 million in 2001. Based upon projected earnings for 2002, the purchase price represents a multiple of about 6.9 times EBITDA (earnings before interest, taxes, depreciation and amortisation).
"This is an excellent opportunity for Alcan and, like Alouette, demonstrates our ability to be selective in acquisitions to meet our governing objective of maximising value. The proposed acquisition adds attractive market segments and economic opportunities. It also reinforces Alcan's commitment to profitably grow the packaging business and increases our ability to serve our customers as they expand globally", said Travis Engen, president and CEO of Alcan.
FlexPac comprises a set of custom manufacturing businesses producing high-quality flexible packaging products for a wide variety of end-use customers and manufacturers of consumer goods, including those in the food, dairy and pharmaceutical industries. The group would add leading technological capability, including engineered films, and management strength to the Alcan Packaging portfolio.
Alcan claims that the new product and market portfolios are complementary to its existing packaging businesses, offering value- creating synergies and enhancing Alcan's ability to serve its customers. FlexPac has in recent years been expanding its activities in developing markets, including Turkey and China where operations were added to the portfolio in mid 2001. This would allow the company to participate more effectively in Eastern Europe and Asia.
Alcan also pointed out that in becoming part of its packaging group, FlexPac would have better stability and strategic direction. The aim is that together, these would allow the transfer of best practices between the two groups to improve overall performance.
It is the parties' intention to sign a definitive agreement once Norsk Hydro has completed its consultations with the representative employee bodies. The proposed transaction is expected to be completed in mid-2003, subject to the necessary regulatory approvals. At the conclusion of the share purchase agreement, it is also intended that Alcan will waive the pre-emptive rights in respect to the Alunorf rolling mill in Germany and will terminate the related litigation. With this proposed settlement, the parties have agreed to work together to clarify the structure of the Alunorf joint venture and to achieve improvements in the operations at Alunorf rolling mill.
Alcan is a multinational, market-driven company and a global leader in aluminium and speciality packaging with 2001 revenues of US$12.6 billion (€12.67bn) and with operations in primary aluminium, fabricated aluminium and flexible and speciality packaging. The company employs some 48,000 people and has operating facilities in 38 countries.