Rexam, the UK’s biggest can and bottle maker, is in talks to buy the plastics division of US glass maker Owens-Illinois in a deal that could be worth about $1.5billion if it successfully materializes.
Company conformed that the acquisition would be funded from the sale of Rexam’s glass business, debt and some equity. Rexam agreed in March to sell its glass business for $884 million.
In the recent period Rexam shows its keenness to expand in plastics segments, whereas company reduces its presence from the glass division. This business tactic may prove useful for the can maker as the company’s existing plastics unit posted an 11.4 percent return on sales last year, compared with 8.2 percent for glass. Both were eclipsed by the cans unit, with a return on sales of 11.7 percent. Rexam makes one in every four cans worldwide.
UKL-based Rexam has been growing its rigid plastic packaging business through acquisitions in recent years. It purchased two US plastics packaging companies, Precise Technology and Delta Plastics, in 2005, and last year it bought Dutch pumpmaker Airspray and Chinese company FangXin.
Market experts weighted the deal will be lucrative for the Rexam and shareholders would get benefited in the long run. They expect that deal would tighten the company’s grip in the high growth sector of plastics packaging–health care–where Owens-Illinois operates. Owens-Illinois’ plastics business accounted for 10 percent of its revenue, and 13 percent of its $866 million profit in 2006.
Rexam’s shares fell in morning trade as analysts voiced concerns over the required funding for the acquisition. Company shares lowered and closed at 14.50 pence (29 cents), or 2.8 percent, to $10.04, in anticipation of the buy-up, performing below the market average for London.
Image: Quimica
Via: Bloomberg
