The move, announced yesterday, will see the flexible packaging supplier take over 23 Food Americas flexible packaging facilities in the U.S., Canada, Mexico, Brazil, Argentina, and New Zealand. Alcan Packaging Food Americas is a business unit of international mining giant Rio Tinto.
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. “In pooling our resources, we will diversify our existing technologies and product lines which will broaden our product offering and augment our technical capabilities.”
In explaining the deal, Bemis said that acquisition has three highlights, including increasing the global presence with Bemis’ pro forma 2008 net sales set to increase 40 per cent to about $5.3 billion, an opportunity for substantial synergy with the company expecting over $65 million of annual run-rate pre-tax synergies to be achieved by the end of the second year following the acquisition date, and a preservation of the credit rating
“Management intends to fund the purchase price with a combination of $1.0 billion in debt and $200 million in equity,” stated the company. “Management is confident that the combined companies will generate strong free cash flow to support diligent debt repayment and an investment grade credit rating.”
The purchase price is reported to represent an adjusted EBITDA multiple of approximately 4.8 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 and the estimated annual run-rate synergies of $65 million.
“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,” said Theisen.
“The two companies clearly complement each other, and I’m looking forward to the exciting future this combination will bring,” he added.