Bemis Company, Inc. (BMS) announced that it is selling its global Pressure Sensitive Materials (MACtac) business to a California-based private equity firm, Platinum Equity, in order to raise $170 million in cash to fund the growth of its flexible packaging business. The sale is expected to close in the fourth quarter of 2014.
Neenah, WI-based Bemis is a major supplier of flexible packaging, catering to leading food, consumer products, medical and pharmaceutical companies globally, which contributes roughly 89% of its total revenues. The Pressure Sensitive Materials segment, through which Bemis supplies pressure sensitive adhesive coated materials worldwide, accounts for the balance 11%. The business segment has manufacturing facilities located in Scranton, PA; Columbus, IN.; San Luis Potosi, Mexico; Soignies, Belgium; and Genk, Belgium, along with offices located in Stow, OH, and a worldwide sales and distribution network.
In 2013, the Pressure Sensitive Materials segment reported sales of $553.2 million, which declined 0.4% year over year as lower unit sales of value-added graphic and technical products negatively impacted sales mix during the year. In the first half of fiscal 2014, the segment’s sales increased 1.6% to $287 million. Favorable foreign currency translation, higher selling prices and favorable sales mix of value-added graphic products were offset by lower volumes.
In line with this divestiture initiative, Bemis divested its Paper Packaging Division in March this year. The division had generated annual net sales of $160 million in 2013. Net proceeds from the sale totaled $79.8 million, which was redeployed to repurchase 2 million shares during the first half of 2014.
Historically, about 65% of its total sales are to customers in the food industry. Sales of the packaging products are widely diversified among food categories and the food industry has typically provided a more stable market environment for its U.S. Packaging and Global Packaging business segments. On the other hand, the Pressure Sensitive Materials business segment, even though diversified in end use products, is more exposed to economically sensitive end markets. The sale of this business will allow the company to focus on strategic opportunities in high-barrier flexible packaging, medical and pharmaceutical packaging.
Bemis reported second-quarter 2014 adjusted earnings of 65 cents per share, up 6.6% from 61 cents earned in the year-ago quarter. Management expects adjusted earnings per share in the range of 65–70 cents for the third quarter of 2014. For full-year 2014, the company expects earnings to range between $2.45 to $2.55 per share. The Zacks consensus Estimate for the third quarter is at 68 cents, reflecting 12.7% year-over-year growth and for fiscal 2014 is at $2,50, a 9.81% annual climb and at the midpoint of the company guidance range.
Bemis will benefit from healthy customer order levels and commercialization of new business at an accelerated pace, which will support the expected unit volume and profit margin growth in 2014. Its new product innovations have created positive momentum to support continued performance improvement through the second half of 2014.
Currently, Bemis has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Sealed Air Corporation (SEE), Graphic Packaging Holding Co. (GPK) and Berry Plastics Group, Inc. (BERY). While Sealed Air Corporation and Graphic Packaging sport a Zacks Rank #1 (Strong Buy), Berry Plastics carries a Zacks Rank #2 (Buy).
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