Sonoco Products Co. (SON) has entered into an agreement to acquire Weidenhammer Packaging Group to strengthen its packaging business in Europe and further expand its expertise in stable, highly decorated convenience packaging. The acquisition is worth $383 million in cash, subject to a normal adjustment of net working capital.
Headquartered in Hockenheim, Weidenhammer is a leading provider of composite cans in Europe and mainly focuses on the production of composite drums and rigid plastic containers using thin-walled injection molding technology with modern in-mold labeling.
Weidenhammer has a workforce of nearly 1,100 people and operates 13 production facilities, including five in Germany. Weidenhammer expects its 2014 sales to be around $327 million, with EBITDA of approximately $56 million. The transaction will bring in new opportunities for Weidenhammer’s business with additional growth prospects through new customers and new markets.
Sonoco intends to fund the acquisition through a combination of existing cash and debt with an estimated combined net credit leverage ratio of 1.75x at closing. The acquisition is subject to governmental regulatory review and is expected to close in the fourth quarter of 2014.
The transaction is expected to have no material impact to Sonoco's 2014 base earnings and should be accretive to its 2015 base earnings in the range of 9—14 cents per share, including estimated adjustment for purchase accounting and first year synergies. Future accretion is expected through material internalization and other cost synergies.
The acquisition is expected to increase Sonoco's consumer-related packaging and services business to around $2.8 billion in annual sales or around 53% of its combined revenue. In addition, the combination is expected to increase Sonoco's net sales in Europe to roughly 21% of total sales.
After the buyout, Sonoco will be a global leader in rigid paper packaging. Sonoco will provide its customers with innovative packaging expertise throughout North America and Europe following the acquisition, in addition to expanding its presence in the emerging markets of Southeast Asia, China, Eastern Europe and South America.
Sonoco will benefit from its continuous efforts to drive organic sales growth through the development of innovative solutions. The company remains focused on various projects which utilize its unique i6 Innovation Process. Development of customized solutions through the combination of Sonoco’s technical expertise in material science, design, graphics management and supply chain capabilities will also help customers.
South Carolina-based Sonoco is a global provider of a variety of consumer packaging, industrial products, protective packaging and packaging supply chain services. The company is also the largest producer of paper-based tubes and cores in North America.
At present, Sonoco carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Sealed Air Corp. (SEE), Graphic Packaging Holding Co. (GPK) and Ball Corporation (BLL). While Sealed Air Corporation hold a Zacks Rank #1 (Strong Buy), Graphic Packaging and Ball Corporation carry a Zacks Rank #2 (Buy).
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