Bemis admits talks over Alcan Packaging acquisition

In a first-quarter earnings’ call, senior vice president and chief financial officer Gene Wulf said Bemis had taken a $9.1m charge from costs “associated with the due diligence on potential acquisition of a portion of the packaging business belonging to Rio Tinto”.

He said no further information would be provided at this stage, but that the acquisition was consistent with Bemis’ strategy of “focusing on core competencies while retaining an investment grade profile”.

“Confidential efforts are ongoing,” said Wulf.

Bemis said the its flexible packaging operation, which accounts for about 85% of the business, recorded an 8.5% drop in net sales in the first quarter of $715m. The company’s pre-tax income fell by 14% to $58.6m.

Nicholas Mockett, partner at Europa Partners, said the deal made sense because of the existing synergies between Bemis and Alcan and the ability to rationalise plants, particularly in North America. “Bemis looks for differentiated value-added packaging and there’s quite a bit of that in Alcan. Medical films, for example, is quite an attractive area to be in ” he said.

Rio Tinto has been trying to sell the packaging division since it acquired Alcan in June 2007, and Mockett said part of the reason for the delay was the view the unit should be sold as a whole.

“Any firm trying to fund a deal and access debt lending facilities will have struggled to do a deal [for the whole business]. Accessing funding has not got any easier and a piecemeal sale of the division has got to help,” he said.

Earlier this month, Rio Tinto directors admitted that the packaging unit might have to be split up to find a buyer, and expressed “regrets” that the process had taken so long.

The statement is Bemis’ first public admission that it is in talks over an acquisition of part of the Alcan Packaging business. Amcor, the Australian-owned group, revealed in February that it was in talks over buying part of the business.

According to the new FAS 141(R) accounting standard, acquisition costs associated with possible business combinations, such as accounting and legal fees, must be expensed when incurred.

A spokesman for Rio Tinto Alcan declined to comment on the talks.

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