Amcor pays $1.6B for PET business


Plastic drink bottles are big business in European markets

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Australia's largest packaging group, Amcor Ltd, will buy the packaging and bottling assets of Germany's Schmalbach-Lubeca for $1.6 billion, the company said Wednesday.

The deal will make Amcor one of the top five packaging groups in the world, and the biggest maker of plastic bottles for water and softdrinks.

Schmalbach's PET (polyethylene terephthalate) container and packaging business had combined sales last year of $1.78 billion (Aust. $3.3 billion).

Amcor said the price it is paying is about 6.7 times earnings before interest, tax, depreciation and amortization.

The combined Amcor-Schmalbach business will operate 51 plants in 20 countries, including in Europe, North America, Latin America, Australasia and Asia.

Plants in Asia

Amcor has spent about $700 million buying flexible packaging-related operations in the past year, mainly in Europe, but the Schmalbach deal gives it unrivalled scale in Europe's PET business.

In North America Amcor operates the Twinpak PET business in the U.S. and CNC Containers and PET Pack in Canada, while in Asia it has plants in China, Indonesia, Malaysia, Singapore and Thailand.

In a statement to the Australian Stock Exchange Wednesday, Amcor managing director Russell Jones said the company was buying an "extremely well managed business" in Schmalbach.

"In combining the two businesses, Amcor has created the leader in PET containers," he said.

PET containers are used by food and beverage makers such as Coca-Cola, Danone and PepsiCo, primarily for bottled water, juices and softdrinks.

Raising new equity

Jones said the goal was for the Schmalbach purchase to be immediately earnings per share positive, with synergy savings of about $11 million (A$20 million) in the first year and $40 million (A$75 million) by year three.

Amcor will pay for the purchase through a combination of new equity, debt and the sale of its 45 percent interest in Kimberly-Clark Australia for about $380 million.

Details of the equity raising will be announced before trading in Amcor shares resumes on Friday, but it is understood to be made up of about $540 million in new shares, about $110 million of convertible securities, about $430 million in bonds and $110 million of bank debt.

Amcor closed Tuesday at A$7.68 before it entered a trading halt for Wednesday and Thursday. It touched a six-year high of A$8.01 on March 12 this year.