Amcor announces today it has reached an agreement to purchase the assets of Ball Plastics Packaging Americas from Ball Corporation. The transaction is subject to regulatory approval in the USA. The purchase price is US$280 million, which represents four times the last 12 months acquired EBITDA of US$70 million.* The business has five plants in North America and sales of approximately US$600 million.
Approximately 50% of the earnings of the business are derived from the Diversified Products and Custom Beverage segments, and 50% from the CSDW segment.
The acquisition presents a significant opportunity to improve operating efficiencies and achieve synergies as the businesses integrate. Net synergy benefits are anticipated to be approximately US$35 million. The cash cost to achieve these synergies is expected to be approximately US$45 million with an additional non-cash writedown of US$30 million.
Inclusive of net synergies, the EBITDA is targeted at US$105 million at the end of year three. The total cost to achieve these earnings is US$325 million, comprised of US$280 million purchase price and US$45 million to deliver synergies. This represents an EBITDA multiple, post synergies, of 3.0 times.
The acquisition will expand Amcor’s Diversified Products business. The Diversified Products business targets the health care/pharmaceutical, personal care, food and distilled spirits end markets. The acquisition brings exposure to new growth opportunities including wine bottles, retort packaging for food, and high density polyethylene (HDPE) and polypropylene (PP) containers for various market segments.
Additionally, Amcor Rigid Plastics will be positioned to offer a broader range of innovation and technology-based solutions to customers. The acquisition of Ball Plastics Packaging Americas brings with it expanded capabilities, including exciting developments in multi-layer, retort, and barrier technologies as well as the assets and know-how to manufacture HDPE and PP extrusion blowmolded containers.
* Amcor is only acquiring the plants. Therefore, EBITDA effective at closing excludes Ball Corporation corporate and divisional SG&A charges.
Amcor Rigid Plastics North America had sales of approximately US$175 million in Diversified Products prior to the acquisition of Alcan Pharma Plastics Packaging. Following the acquisition of Ball Plastics Packaging Americas and Alcan Pharma Plastics Packaging, sales in the Diversified Products division will increase to approximately US$425 million.
The acquisition will be funded from existing undrawn facilities at an interest cost of approximately 5%. Following the acquisition, gearing will be approximately 46%.
Amcor's Managing Director & CEO, Mr. Ken MacKenzie, said, "This is an important strategic opportunity to further expand our position in the Diversified Products' market. This is a high growth market, and the capabilities of the Ball acquisition will help us expand our business in North America and to leverage new technologies and products in our growing Latin America business.”
"In the current global economic environment, there are opportunities to acquire businesses at prices that are substantially lower than a few years ago,” said Mr MacKenzie. “The significant synergy opportunities this acquisition generates will underpin strong returns from the first full year and have a positive impact on earnings per share."