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Mergers & Acquisitions

Competition for Rio Tino packaging unit heats up

AUSTRALIA - Amcor, US packaging company Bemis, and private equity deal mongers Apollo Global Management and Bain Capital LLC have been cited as parties interested in the Alcan packaging operations which Rio Tinto is trying to sell.

These companies have been linked to the auction Morgan Stanley is running for the global packaging operations that Rio Tinto gained in its 2007 US$38 billion Alcan acquisition, Reuters reported.

The price tag for the unit, which includes flexible, pharmaceutical and tobacco packaging, has dropped from its initial US$6 billion to US$5 billion. The packaging unit generates approximately US$6 billion in revenue annually, is headquartered in Paris and has 31,000 employees in 129 sites around the world. The second round of bidding is expected to close on 30 September reported in July 2008 that industry sources have indicated Rio Tinto is now willing to sell the Alcan packaging division in a few pieces, rather than as a whole unit, to help facilitate a transaction.

The mining group is trying to raise US$15 billion or more from asset sales to lower the US$40 billion debt it took to buy the entire Alcan company. Besides the packaging unit, Rio Tinto mining assets such as its Cortez gold mine in Nevada, the Kintyre uranium deposit in Australia and the Alaskan Green Creek silver project have also been marked for sale.

Amcor completed a three-year “get fit” program last month to fix, sell or close underperforming assets – it has sold assets in Europe, including its flexible packaging plants in UK and Sweden, and indicated that it is concentrating more on emerging, lower-cost locations.

During the announcement of the program completion, Ken MacKenzie, Amcor’s Chief Executive, said that the company is now looking for acquisitions in the flexibles, tobacco and PET plastic bottle sector. At the time, MacKenzie declined to confirm any purchasing interest in the Rio Tinto packaging operations.

Rio Tinto, Amcor, and Bemis were not immediately available for comment. Apollo and Bain have declined comment.

Credit markets hamper sale of Rio Tinto Alcan aluminium packaging division

CANADA - Problems in credit markets are making it difficult for Rio Tinto Alcan to sell off its aluminium packaging division to a single buyer.

More than a year ago, Rio Tinto Alcan announced that it was selling off its aluminium packaging division, one of about US$15 billion worth of assets that it plans to sell as it shifts its focus on upstream metal production. Industry analysts had then said that the company was looking to sell the aluminium packaging division as a whole.

Tight global credit markets however have hampered the sale efforts, said Christopher Manuel, a packaging analyst with KeyBanc Capital Markets.

"Nobody wants to go in and take a big slug off right now," he said.

Instead, Manuel explained, industry sources have indicated Rio Tinto is now willing to sell the division in a few pieces to help facilitate a transaction, which could be worth up to US$5 billion.

This is a stark contrast to a year ago when Dick Evans, CEO of Rio Tinto Alcan, said that the company had received high interest from very credible parties and would end up with quite a good value. SealedAir was rumoured to be a very keen buyer, until credit markets melted and removed the financial leverage for the private equity partner, noted Manuel.

Rio Tinto Alcan spokesman Stefano Bertolli recently said, "Our preference is to sell it whole but at this point the process is ongoing and I can't really say what we are looking at in terms of different options."

One of the names thrown up in the speculation of potential buyers is Bemis, a Wisconsin-based packaging company with US$3.6 billion in annual sales. Bemis’s only comment so far was that "there are a number of packaging companies in the world, both private and public, that we would continue to look at as the industry changes and continues to consolidate." It has refused to comment specifically on Rio Tinto Alcan.

Alcan had said the division would be sold even before it accepted a friendly US$38.1 billion takeover offer from Rio Tinto more than a year ago. It uses plastics, engineered film, aluminum, paper, paper board and glass to produce food, pharmaceutical, beauty and tobacco packaging.

The operations, which employ some 31,000 people, were enhanced with Alcan's 2003 acquisition of French aluminum producer Pechiney.

Even as it continues to wait for a buyer for its aluminium packaging division, it has been business as usual for the other divisions in Rio Tinto Alcan. The company recently opened a US$10 million flexible packaging plant in India that will expand its presence in Asia.

Emerging markets such as Asia represent about 20% of its US$6.2 billion of annual sales. The company has been slimming down operations in developed countries by closing facilities in the U.S. and Europe.

Tetra Pak buys NZ food processing companies

NEW ZEALAND - Swedish food processing and packaging solutions provider Tetra Pak has acquired the assets of two specialised food processing companies, Downer MBL Pty Ltd and Downer MBL, from Australian-based Downer EDI for an undisclosed sum.

Downer MBL, the specialised food process engineering division of Downer EDI, currently serves the food and dairy markets in Oceania and Asia, Based in Hamilton, New Zealand, the company specialises in new plant sales, plant relocation, upgrades and development, and implementing materials handling solutions for the food, dairy, beverage and related sectors.

Through this acquisition, Tetra Pak hopes to strengthen its portfolio of complete production solutions for cheese and dairy powder with the addition of new process engineering, materials handling and project management expertise for evaporation, drying, powder handling and whey processing.

Sam Strömerstén, President, Tetra Pak Processing Systems, said, “The acquisition of Downer MBL strengthens our end-to-end processing solutions for cheese and dairy powder by providing us with additional resources, knowledge and competence.

“In addition, our expanded presence in Oceania will help strengthen our global customer partnerships as the New Zealand powder industry is considered one of the benchmarks for innovative powder solutions worldwide.”

Downer MBL has been Tetra Pak’s sales agent and production solutions partner in the Oceania region for the past 16 years, and believes that this acquisition is a “natural progression in the development” of both companies.

“We have enjoyed working with Tetra Pak as its representative in New Zealand,” Geoff Wilson, General Manager, Downer MBL, commented, “and we believe that our process engineering and project management expertise will create further opportunities with Tetra Pak’s food processing solutions worldwide.”

Tetra Pak revealed that according to the terms of the agreement with Downer EDI, 37 Downer MBL employees and 19 contractors throughout Australia, China and New Zealand will become part of Tetra Pak Cheese and Powder Systems, a division of Tetra Pak Processing Systems, in their respective markets.

Downer MBL employees based in China and Australia will join the local Tetra Pak market company, while employees in New Zealand will continue to be based in Hamilton. Tetra Pak will also become responsible for completing all customer contracts on behalf of Downer EDI. This becomes effective immediately.

Tetra Pak in Asia
According to the Swedish company, its latest shift in expansion strategy to focus on emerging markets such as India, Pakistan, Russia, Brazil, the Middle East, Latin America and China, has yielded encouraging results, with a 6.1% increase in sales in 2007 to €8.7bn.

In June 2008, the company announced that it would invest €90 million to build a new state-of-the-art packaging material factory in Pakistan to supply both local and regional customers.

The plant will have an initial capacity of 8 billion packages per year, with the possibility of doubling to 16 billion packages, such as the Tetra Brik Aseptic (TBA) and Tetra Fino Aseptic (TFA). This will make it Tetra Pak’s largest facility in the Middle East region for the production of packaging material for liquid food products.

Alejandro Anavi, Executive Vice President Supply Chain Operations, Tetra Pak, was quoted in a press statement: “These investments demonstrate our continuing commitment to support our customers around the world with best-in-class packaging and processing systems, thus ensuring faster delivery, better quality, greater convenience and increased flexibility.”

Ground-breaking for the new factory is planned for the third quarter of 2008, with the start of commercial production during the second half of 2010

Besides its expansion in Pakistan, Tetra Pak also expects to complete the construction of a new €60 million packaging material plant in Huhhot, China later this year, to support growth in the dairy and beverage industries there.

Jap co buys 30% in Indian plastic converter

INDIA - Japanese conglomerate Itochu Corp. of Tokyo has acquired a 30% stake in Indian plastic packaging manufacturer Narendra Plastic Pvt Ltd.

Mumbai-based converter Narendra Plastic has sold a 30% share to Japanese giant conglomerate Itochu for an undisclosed sum. Narendra, which produces different types of plastic packaging - from materials ranging from polypropylene (PP), high-molecular-weight high density polyethylene (PE), low density PE, to biaxially oriented PP, has average global sales of about US$40 million per annum.

Neemit Punamiya, Narendra’s managing director, said, “Itochu’s profound expertise in international operations will bring a host of processes such as improving corporate governance, domain expertise in technology, manufacturing, marketing and a quantum leap in export orders and sales.”

Narendra has its main production facility in Daman, Mumbai, India. One of its strategies for this year is an expansion of its total annual production capacity to 23,600 metric tons from its current 20,000 metric tons of plastic packaging by mid 2008. This expansion, which will involve its Daman plant and a new facility in Uttartakhand, will help it better serve its customers in India, and worldwide, particularly the US.

Itochu is a global US$95 billion Japanese trading conglomerate with more than 20 subsidiaries and businesses worldwide across a variety of markets and industries such as food products, aerospace, construction, healthcare, mining, textiles etc.

Avery Dennison buys Taiwanese label manufacturer

TAIWAN - As part of its move to enhance its presence in China and the rest of Asia, Avery Dennison Corp. has bought Taiwanese company DM Label for an undisclosed amount.

A manufacturer of high-quality woven labels since its founding in1960 by the Hsu family, DM Label Group has 11 manufacturing facilities in six countries, including China, Vietnam, Malaysia, Indonesia, Taiwan and the United States. Headquartered in Taipei, Taiwan, its core products include woven labels, printed labels, accessory tapes, hang tags, heat transfer labels and "skin touch” fabric ribbon tape.

Dean A. Scarborough, president and chief executive officer Avery Dennison, commented, "The acquisition of DM Label Group reflects our commitment to providing the best, quickest and most consistent service to our customers, wherever they are located around the world.

"The DM Label Group strengthens our woven label product line and reinforces our presence in Asia, a major sourcing area for the global apparel, retail branding and marking industry.”

James Hsu, president and chief executive officer of DM Label Group, said, "We have had a long and productive relationship with Avery Dennison. Now as part of Avery Dennison, we have the opportunity to offer customers an increased product range and the global scale, local presence and resources to help retailers, brand owners and factories meet their business goals.”

"The DM Label Group acquisition and its expanded woven label product line enhances our ability to create superior value for our customers and provide increased speed and responsiveness in delivering products and services to our customers,” added Terry Hemmelgarn, group vice president of Avery Dennison’s Retail Information Services Group.

Hsu will serve as a vice president and general manager, reporting to Terry Hemmelgarn. Terms of the acquisition were not disclosed.

According to Avery Dennison, the latest purchase complements the company’s acquisition and integration of Paxar in 2007 into its Retail Information Services (RIS) group, a provider of brand identification and supply chain management solutions primarily for manufacturers and retailers, including tag and label design and printing; inventory and shipment tracking; and data management systems.

Avery Dennison is a global supplier in pressure-sensitive labeling materials, retail tag, ticketing and branding systems, and office products. Based in Pasadena, Calif., Avery Dennison is a FORTUNE 500 Company with 2007 sales of US$6.3 billion. Products offered by Avery Dennison include: Fasson-brand self-adhesive materials; Avery Dennison brand products for the retail and apparel industries; Avery-brand office products and graphics imaging media; specialty tapes, peel-and-stick postage stamps, and labels for a wide variety of automotive, industrial and durable goods applications.

Linpac puts Viscount up for sale

AUSTRALASIA - UK packaging company Linpac Group is selling its Australian and New Zealand business, Viscount Plastics, to focus on its operations in the Americas, Asia and Europe.

The sale of Viscount, which makes plastic crates, buckets and blow-molded containers, industrial plastic products and water tanks, is expected to fetch more than US$92 million (AUD$100 million), reported The Sydney Morning Herald, quoting sources close to the transaction. Deutsche Bank is managing the transaction.

The bank’s vice-president of global banking Cameron Murray said that domestic private equity investors are expected to be the most likely buyers of Viscount, which has annual revenue of US$138 million (AUD$150 million).

He explained, "Notwithstanding tight credit market conditions, the nature of the business and its strong and reliable cash flows mean we're confident that it will be of strong interest to private equity.”

Amongst the packaging companies predicted to make a bid for Viscount are Visy, Amcor and NCI. Expressions of interest from rival packaging companies and local private equity players will be gathered over the coming weeks, with indicative offers expected within two months.

Viscount was acquired in 2001 by Linpac, who spent $44.5 million to buy the 51% of Viscount it did not already own. Linpac was in turn bought by Montague, a London-based private equity company, in 2003. Montague is now trying to exit its investment in Linpac, and free up more cash for other investments, such as British waste company Biffa, which it intends to buy for US$2.38 billion (£1.2 billion) with partners General Electric and Credit Suisse.

If Viscount fails to garner sufficient interest from buyers this time, local newspaper The Australian suggested that it could be retained by Montague as part of Linpac and sold as part of an eventual disposal of the entire group.

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