Amcor offers $2bn for Alcan packaging units

The Australian group this morning ended months of speculation when it made the $2.025bn offer to buy Alcan Packaging’s Global Pharmaceuticals, Food Europe, Food Asia and Global Tobacco divisions. The deal would create a group with almost $12bn sales, 35,000 staff and more than 200 factories around the world.

The two companies said that the deal would improve the two businesses, although international trade union UNI Graphical expressed concern over likely restructuring once the deal happens.

Once the deal goes through, it will add US$4.1bn in sales, 14,000 employees and 80 factories in 28 countries to Amcor’s current empire, which spans 226 plants in 34 countries employing 21,000 employees. Amcor, which also released annual results today, already has sales of AUS$9.3bn (US$7.8bn).

As expected, Alcan’s Beauty and Personal Care division is not included in the deal. Amcor said that it had only offered to buy those businesses that fitted its strategic growth plans. A spokeswoman for Alcan Packaging this morning told Packaging News that the division remains up for sale, but said that it was too early to comment on likely buyers.

‘Greater value’ for customers

In this morning’s statement on the offer, Amcor managing director and chief executive officer Ken MacKenzie said the deal would bring customers of both companies “even greater value through broader offerings and enhanced customer service”.

He added: “Critically, beyond the hard assets, the combined company will draw on the best people from both organisations to drive these improvements.”

Rio Tinto said that it would respond to the offer following consultation with its European works councils.

Rio Tinto chief financial officer Guy Elliott said: “We believe Amcor’s offer is in the interests of all stakeholders. These businesses would be acquired by a leading player in the global packaging sector that is very well placed to enable ongoing success of the businesses.”

Concern over likely restructure

The deal is unlikely to complete for several months, as negotiations over the deal with Alcan’s works councils and with US and European competition authorities need to take place.

However, Amcor has raised the possibility that it will restructure and consolidate its plants once the acquisition is complete. In Europe, it has already gone through a period of restructuring in the past year.

In a document posted on its website about the deal it said: “We do not have all the information we would need to make decisions about any future restructuring. Once we have complete access to Alcan Packaging’s information we would put a transition plan in place.”

However, it said that until the deal was complete the two businesses would continue to run as separate and competing groups.

Speaking to Packaging News from Australia this morning, UNI Graphical head Steve Walsh expressed concern over the likely effect on workers’ jobs once a restructuring plan is put in place and said that he would be seeking meetings with Amcor “as a matter of urgency”.

“It’s early days and there are more unanswered questions than answered ones,” he said. “Amcor has moved a lot of plants out of, for instance, the UK and Spain in recent years to lower-cost economies. We will need to sit down and find out how that could figure.”

He admitted that the union traditionally had a stronger relationship with Alcan than with Amcor. Another aspect to consider, he said, was how works councils at Amcor and Alcan would be merged once the businesses are operating as a single group.

Background to deal

Today’s announcement comes after months of speculation over the deal. However, the completion of the deal this week was predicted last Monday and Amcor yesterday suspended trading of its shares in anticipation of a major announcement.

It also comes six weeks after Rio Tinto began the sell-off of its Alcan Packaging business – more than two years after it first put the group up for sale – with the $1.2bn sale of the North American food business to Bemis.

Rio Tinto acquired the Alcan packaging business in its $38bn acquisition of mining giant Alcan in July 2007 and immediately put it up for sale to help pay off debt associated with the acquisition.

Amcor and Bemis have been the only likely candidates to buy the company since before the start of this year, and both have admitted being in talks over a possible deal. However, other names including Sealed Air and Rank Group had been linked to Alcan.

While the sale was delayed by the impact of the credit crunch, Rio Tinto directors nevertheless admitted earlier this year that they regretted the slow progress on the sale of the business.

Rio Tinto shares edged up 3% this morning to £23.18 following the announcement.

AMCOR’S ALCAN ACQUISITION: KEY STATISTICS
All in US$

AMCOR
Annual sales $7.8bn
Plants 226
Countries 34
Employees 21,000

ALCAN*
Annual sales $4.1bn
Plants 80
Countries 28
Employees 14,000

*The sale includes Alcan Packaging Global Pharmaceuticals, Alcan Packaging Food Europe, Alcan Packaging Food Asia and Alcan Packaging Global Tobacco. It does not include Alcan Beauty and Personal Care.

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