The takeover of Bemis by Amcor, announced in August 2018, will create a packaging behemoth – the world’s largest plastics packaging company, by far the biggest flexible packaging combine and probably the world’s largest specialist packaging conglomerate.
As reported by us earlier, Amcor has struck a deal to buy over Bemis in an allstock cash-free transaction valued at some US$ 9.2 billion (approximately Rs. 66,000 crore). The cost to Amcor share-holders is valued at US$ 6.8 billion. This will catapult Amcor into a spot midway on the S&P 500 index with a valuation of the combined entity estimated at about US$ 23 billion (market capitalization of US$ 17 billion).
Amcor foresaw the emergence of flexible packaging as the dominant growth segment in packaging some years ago and has made significant acquisitions in the last 8 years to become the world’s largest company in this business. Armed with a significant war-chest through the divestiture of Kimberley Clark, their first big acquisition in this business was the buying out of a major portion of Alcan Packaging’s portfolio (primarily its flexible packaging assets) in 2010. Since then, Amcor has consolidated its status further by acquiring 20 more companies in the last 6 years, primarily in Asia, including Packaging India Pvt. Ltd. in India in 2016. But nothing compares even remotely with this new acquisition.
Australia-based Amcor registered sales of US$ 9.1 billion in 2017; the company is currently at about US$ 9.3 billion generated from 200 facilities in 43 countries (North America, Europe, Latin America and Asia-Pacific including Australia) employing about 35,000 employees. It has long been looking at becoming numero uno in flexible packaging and nothing fits the bill as well as Wisconsin-based Bemis, who generates US$ 4.1 billion in sales from 57 plants in 12 countries, employing about 16,000 people. Bemis is by far the world’s leading flexible packaging specialist with over 95% of its revenues coming from this segment through high-end applications and leadership in conversion technologies, particularly for the food and consumer packaging and healthcare segments.
The acquisition will engender a conglomerate with US$ 13.4 billion in revenues and an EBITDA of US$ 2.2 billion, which makes it, by some distance, the world’s leading specialist packaging company with a huge global foot-print. Of particular significance is the fact that the combined flexible packaging business portfolio will now be worth some US$ 8.9 billion broken up as follows:
North America – US$ 0.6 billion (Amcor) + US$ 2.8 billion (Bemis)
Europe – US$ 2.9 billion (Amcor) + US$ 0.3 billion (Bemis)
Latin America – US$ 0.4 billion (Amcor) + US$ 0.5 billion (Bemis)
Asia Pacific – US$ 1.2 billion (Amcor) + US$ 0.2 billion (Bemis)
What has happened is that Amcor will now become the dominant player in the prime American market – a long cherished Amcor dream.
The deal itself was worked out by offering 5.1 Amcor shares for every Bemis share, which represented an approximate 25% premium on Bemis’ share price. After the deal, Amcor shareholders will gain 71% ownership of the combined entity and Bemis shareholders will get the remaining 29%. The deal will generate considerable synergies in costs and efficiencies with the expected annual cost savings projected to hit US$ 243 million in 3 years’ time.
On a point of information, although this makes the new combined company the world’s largest specialist packaging enterprise, in the overall packaging market it would be just behind International Paper, whose packaging portfolio was worth about US$ 22 billion (69% of its total revenues) in 2017.
