Berry Plastics to acquire AEP to become a ‘one-stop shop’ for customers with flexible film needs

By Jenny Eagle contact

- Last updated on GMT

Related tags: Berry plastics, North america

Berry Plastics manufactures flexible film for cereal packaging among others. Picture: Berry Plastics.
Berry Plastics manufactures flexible film for cereal packaging among others. Picture: Berry Plastics.
Berry Plastics Group has entered into an agreement to acquire AEP Industries (AEP), a manufacturer of flexible plastic packaging films in North America, for $765m, expected to close in December.

The deal is expected to offer complementary production capacities, reduce material and conversion costs, and better serve customers from an expanded North American footprint, according to Berry.

Cost synergies of $50m or more

Jon Rich, chairman and CEO, Berry Plastics, said the company expects to realize cost synergies of $50m or more annually, in line with previous Berry acquisitions of a similar nature.

The firm has completed more than 40 acquisitions in its history. Its last deal was for specialty materials producer Avintiv in October last year.

Rich said AEP together with Berry’s Engineered Materials Division, will create an impressive packaging film producer serving the North American market.

Berry-Plastics-charts-out-31m-move

Speaking to investors on a conference call yesterday Rich said it wants to become a ‘one-stop shop’ for customers with flexible film needs.

We have long admired the accomplishments of AEP. It has grown dramatically over the past 46 years under the guidance of founder and current chairman and CEO, Brendan Barba​.

They have found significant momentum in their business and AEP’s most recent fourth quarter results delivered $1.1bn in sales and just over $100m in adjusted EBITDA​.

This transaction will create incremental value for Berry shareholders because over the last several years Berry’s engineered materials division has achieved dramatic growth and earnings and margins while delivering substantial free cash flow. It has also achieved high returns on investor capital​.

Together we will be able to optimize complimentary production capacities, reduce material and conversion costs, and better serve customers from an expanded North American footprint, with a portfolio of products that is one of the most comprehensive in the industry​.”

Increase the amount of sourcing and conversion of PE

Rich added the acquisition of AEP will increase the amount of Berry’s sourcing and conversion of polyethylene (​PE) by nearly one billion pounds per year.

The timing of this increase should be beneficial as we enter into a period where large tranches of new polyethylene capacities are being added in North America,” ​he said.

Brendan Barba founded AEP over 40 years ago. He said he was looking forward to a seamless merger integration and its 2,600 employees will benefit from the opportunities that come from being part of a larger company.

We believe Berry is the right partner to expand our product portfolio to deliver high quality packaging films to even more customers around the world​," he added.

Upon closing, AEP shareholders will own approximately 5% of Berry on a fully diluted basis. Based on Berry’s closing stock price on August 23, 2016, the date the exchange ratio was set, the blended value of the merger consideration represented $110 per AEP share.

AEP is headquartered in Montvale, New Jersey, and operates 14 manufacturing facilities across the US and Canada.

New York facility closure

BakeryandSnacks reported Berry Plastics was closing a consumer packaging manufacturing site​ in Dunkirk, New York, axing 50 jobs in July.

The Dunkirk facility blow molds products for the food and beverage industry among others, with the last manufacturing day expected to be in October, after which it plans to relocate its production to facilities in Indiana, Iowa and Maryland.

The announcement was in line with the company’s decision to streamline its business structure into three divisions: Health, Hygiene, and Specialties; Consumer Packaging; and Engineered Materials.

I am extremely excited about the transformation taking place at Berry Plastics. The organization streamlines the company while aligning our businesses closely with the markets that we serve​,” Rich said at the time.

I am confident this structure will allow us to best integrate the newly acquired Avintiv business into Berry Plastics and accelerate the strategic growth of the company, while strengthening the service we provide to our customers and the value we create for our shareholders​.”

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