Bemis Co. Inc. shares fell 0.9% Monday afternoon in a subdued response to the news that Australian packaging company Amcor Ltd. is acquiring the company in an all-stock deal valued at $6.8 billion.
will pay 5.1 shares for each Bemis share
giving Amcor about 71% of the combined company, which it said will be a world leader in packaging. The price is equal to a 25% premium over Bemis’ closing price as of Aug. 2. Bemis shares surged 11% on Friday after The Wall Street Journal broke the news of a possible deal. They closed Thursday at $46.31.
“Amcor identified flexible packaging in the Americas as a key growth priority and this transaction delivers a step change in that region,” Amcor Chief Executive Ron Delia said in the announcement.
The combined entity is expected to have revenue of about $13 billion, earnings before interest, taxes, depreciation and amortization of $2.2 billion and annual cash flow of more than $1 billion after capex. It will have an investment-grade balance sheet that will allow it to pursue further deals.
Amcor is expecting it to boost pro forma EPS by a double-digit amount and to generate run-rate cost synergies of $180 million.
Amcor will have its primary listing on the New York Stock Exchange with an estimated market cap of $17 billion and will maintain a listing in Australia. The deal is expected to close in the first quarter of 2019.
“There are an increasing number of opportunities arising for a leading packaging company to capitalize on shifting consumer needs, an evolving customer landscape and the need to provide responsible packaging solutions that protect the environment,” said Delia.
Packaging has become a key focus of environmentalists as the world’s oceans become more polluted by plastics, which is gradually entering the food chain and showing up in water supplies around the world.
Just last week, Kraft Heinz Co.
said it is moving to make all of its packaging recyclable, reusable or compostable by 2025 and is aiming to decrease the overall volume it uses.
Many companies, including Starbucks Corp.
Royal Caribbean Cruises Ltd.
and Marriott International Inc
are eliminating one-use plastic straws, spoons and stirrers, many of which are ending up in landfills or the ocean. Meanwhile, the new American Express Co. credit card
will be made from recycled ocean trash.
Plastic isn’t biodegradable, so it can last for years. The World Economic Forum estimates that by 2050, the world’s oceans will contain more plastic than fish.
Bemis was founded in 1858, when 25-year old Judson Moss Bemis established a bag manufacturing business, according to its website. Today, the company boasts about 16,000 workers world-wide with headquarters in Neenah, Wis. The company specializes in flexible packaging for food, consumer products and health-care applications. It makes metal foil and film lamination for medical goods, as well as packaging for drugs.
Amcor has a 150-year history and started as an Australian forest-product and paper company. It specializes in packaging for food, beverage, pharmaceuticals, medical-device and home and personal-care products.
The company was the first packaging company to commit to making all of its products recyclable or reusable by 2025, said Delia. It is also committed to increasing its use of recycled materials and has aligned with many brands and NGOs who are tracking the problem of plastics in the environment, he told analysts on a conference call, according to a FactSet transcript.
Bemis will bring technical capabilities to the deal that are viewed in the industry as best-in-class, notably in materials science and films, he said.
“We have a center of excellence in Europe working on more sustainable laminates and single layer films. Bemis has a similar initiative underway. We’re going to put those two together and get a better outcome as an example,” he told analysts.
Analyst questions focused mainly on the promised synergies, with many seeking more detail on how they would be achieved given the current pressure on processed food companies, which are struggling to deal with changing consumer tastes amid a push toward healthier options.
Bemis came under pressure earlier this year from activist shareholder Starboard, and eventually agreed to add four independent directors to its board.
Delia said Amcor is experienced at integrating acquisitions and expects the greater scale to allow it to better serve customers in Europe, Asia and Latin America, as well as North America and Brazil, where Bemis is strongest.
Bemis shares have gained 8% in 2018, while the S&P 500
has gained 6%.
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