Rexam to sell glass business to Ardagh

By Ahmed ElAmin

- Last updated on GMT

Related tags: United kingdom

Ardagh Glass today announced an agreement to buy Rexam's glass
container business for €660m.

The agreement will allow Rexam to focus on its core beverage can and plastic packaging business, while Ardagh will double in size to become Europe's third largest glass container supplier. The deal will reduce competition in the glass container market, giving Ardagh 18 per cent of the European market and more power over pricing. Rexam Glass, which employs 3,600 people, focuses on the north European market. Ardagh will gain 13 manufacturing plants once the transaction is completed. The Rexam unit has one plant each in Sweden and Denmark, two in Poland, seven in Germany and two in the Netherlands. The plants output about 7bn glass containers a year, supplying the beverage, food, and pharma markets. The unit reported sales of €642m, sales of €116m and operating profit of £40m (€59m) in 2006. Rexam Glass had net operating assets of £372m (€548m), including goodwill, as at 31 December 2006. Ardagh currently operates nine glass plants in Germany, Italy, Poland and the UK and employs 3,300 people. Post acquisition, the enlarged Ardagh group will have annual sales of about €1.25bn and will operate twenty two glass plants in seven countries, said Paul Coulson, Ardagh's chairman. "Following the acquisition, Ardagh will double in size and become the number three glass container manufacturer in Europe with approximately 18 per cent of the market,"​ he stated. "The acquisition will provide us with opportunities to achieve greater operating efficiencies and to further develop our customer relationships."​ The transaction is conditional on competition authority approvals in Germany and Poland. In 2005 Ardagh Glass bought out Rexam's UK glass business. Ardagh, which demerged from South Wharf in 2003 after closing its manufacturing operations, is controlled by investor Paul Coulson. The company was taken over in 2005 by Coulson and other investors through Caona, a special-purpose company. The Ardagh Glass Group manufactures glass containers in the UK, Germany, Italy and Poland. Through its Rockware subsidiary it operates four glass manufacturing sites in the UK, with a total of nine furnaces and 23 production lines. Ardagh's worldwide turnover in 2004 was €470.3m. Its UK turnover was €260.5m, according to figures on the UK competition authority internet site. Meanwhile, Rexam said its decision to sell follows a review of the position of its glass business within its consumer packaging portfolio. The company's stated strategy over the past few years has been to focus investment on organic growth and acquisitions in the higher growth packaging areas and on emerging markets. Glass accounts for about 12 per cent of the company's sales annually. The company will use the proceeds from the sale to reduce borrowings, said chief executive office Leslie Van de Walle. "Rexam's strategy remains to focus on profitable growth in its core beverage can and plastic packaging businesses,"​ he said. "We have a strong track record of achieving high rates of return on our investments and the proceeds from this sale provide the financial flexibility to generate attractive long term returns for our shareholders." ​ Rexam's clients include Anheuser-Busch, Cadbury-Schweppes, Carlsberg, Coca-Cola, Heineken, InBev, Pepsi, Proctor & Gamble, Red Bull and SABMiller. Rexam claims to be the largest beverage can manufacturer in Europe and holds the number three position in the Americas. It also claims to hold the number two position in the Northern European glass market. The company had global sales of about £3.7bn (€5.5bn), of which 70 per cent comes from beverage packaging.

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