Bemis Company, Inc. has signed a definitive agreement to acquire the Food Americas operations of Alcan Packaging, a business unit of international mining group Rio Tinto plc, for $1.2 billion. Pursuant to the agreement, Bemis will acquire 23 Food Americas flexible packaging facilities in the United States, Canada, Mexico, Brazil, Argentina and New Zealand. These facilities produce flexible packaging for the food and beverage industries.
The transaction is expected to be accretive to diluted GAAP earnings per share beginning in 2010.
For the year ended December 31, 2008, Alcan Packaging Food Americas recorded net sales of $1.5 billion and adjusted EBITDA of approximately $166 million. The purchase price represents an adjusted EBITDA multiple of approximately 6.7 times when taking into account the estimated $100 million of tax benefits related to the structuring of much of the transaction as a purchase of assets. Further adjusting the valuation for estimated annual run-rate synergies of $65 million results in an adjusted EBITDA multiple of approximately 4.8 times. The transaction is expected to close by the end of 2009, subject to customary closing conditions and regulatory review.
“We are very pleased to add Alcan Packaging’s Food Americas business to the Bemis organization,” said Henry Theisen, Bemis president and CEO. “Both Bemis and Alcan Packaging have strong, collaborative relationships with renowned food and consumer products customers. We each have a long history of dedication to outstanding quality and manufacturing excellence. In pooling our resources, we will diversify our existing technologies and product lines, which will broaden our product offering and augment our technical capabilities. This acquisition provides value from all angles and is a prudent investment in Bemis’ future.”
Highlights of the transaction:
· Increased global presence: Bemis’ pro forma 2008 net sales increase 40% to approximately $5.3 billion, with the percentage of net sales to the resilient food packaging space increasing from 57% to approximately 70% of total Bemis net sales. The transaction also adds nearly 4,600 employees to Bemis’ global workforce for a total of over 20,000 employees at 84 manufacturing locations worldwide.
· Substantial synergy opportunity: Bemis expects over $65 million of annual run-rate pre-tax synergies to be achieved by the end of the second year following the acquisition date. Of this total improvement, nearly 50% is expected to be achieved within 12 months of completing the transaction, and will be achieved primarily by optimizing product mix, improving operational and supply chain efficiencies and reducing duplicate administrative costs.
· Financing structure preserves solid investment grade credit rating: Management intends to fund the purchase price with a combination of $1.0 billion in debt and $200 million in equity. Management is confident that the combined companies will generate strong free cash flow to support diligent debt repayment and an investment grade credit rating.
“Bemis has historically maintained a strong balance sheet to ensure our ability to take advantage of opportunities like this,” Theisen said. “Alcan Packaging Food Americas has demonstrated a commitment to investing in their operations and their workforce. The combined companies are expected to generate cash flow sufficient to rapidly reduce debt outstanding while maintaining our combined portfolio of world class manufacturing facilities, investing in growth opportunities and supporting Bemis’ historic dividend policy. The two companies clearly complement each other, and I’m looking forward to the exciting future this combination will bring.”
Barclays Capital and Greenhill & Co. are acting as financial advisors to Bemis for this transaction, while Baker & McKenzie LLP is acting as primary legal advisor to Bemis.