Amcor Rigid Plastics has recently signed a deal to take over Sonoco’s Global Plastic blow molding business assets in North America. The deal has been agreed upon over a price of US$280 million, which is equivalent to a multiple of 8.0 times LTM EBITDA.
Sonoco deals in manufacturing of custom rigid jars, plastic bottles, and overcaps for industries such as food and beverage, health and beauty, personal care, and pharmaceutical. The company owns six manufacturing facilities in the US and one unit in Canada. The seven production units collectively produce around US$210 million sales per year.
Ever since its establishment, Amcor Rigid Plastics has created a strong niche in the specialty container market with the help of its Diversified Products business, with the acquisition of advanced technologies. The latest acquisition is expected to improve the product line of Amcor with the addition of complementary competences and technologies such as far-reaching extrusion blow molding and injection machines,and proper know-how about manufacturing polypropylene, polyethylene and multi-layer containers.
With the inclusion of the new business, the Diversified Products business is expected to report total sales of around US$750 million. By the end of FY2020, i.e. third full year of ownership, the take-over will further add nearly US$50 million of PBIT to Rigid Plastics segment of Amcor due to the inclusion of synergy benefits equivalent to some US$20 million and significant market growth.
Ron Delia, Amcor CEO, and Managing Director said, “The Amcor Rigid Plastics business has significant growth opportunities, including in segments outside of the traditional non-alcoholic beverage markets. Part of our strategy to grow this business includes acquiring specialised manufacturing capabilities which unlock further growth in key segments.”
He added, “This acquisition represents the next step change for Amcor in terms of scale and capabilities for specialty container manufacturing. Along with providing synergies, the acquired business also brings strong relationships with important new customers, strengthens our product platform and positions this business to grow faster than the overall market.”