Packaging company Silgan Holdings Inc. SLGN declared the final results of its previously announced “modified Dutch auction” tender offer. Silgan will purchase 2,766,354 shares for approximately $161.8 million, per the offer.
In line with its long-term objectives of optimizing shareholder returns, the manufacturer of consumer goods packaging products commenced this offer on Feb 9, to purchase up to $200 million shares, subject to various terms and conditions.
Silgan will fund this purchase from cash on hand and revolving loan borrowings under its senior secured credit facility. The company believes this return of capital in the form of share repurchase will drive shareholder’s value.
For the same purpose, Silgan also raised its quarterly dividend by 7% to 16 cents per share on Feb 26. The raised quarterly dividend will be paid on Mar 30, 2015, to shareholders of record as of Mar 16, 2015.
On Feb 28, 2014, Silgan authorized the repurchase of up to $300 million worth shares, inclusive of prior authorizations, from time to time through and including Dec 31, 2019. Pursuant to this, the company repurchased an aggregate of 506,167 shares in the second and third quarters of 2014, for a total purchase price of $24.5 million. On Dec 31, 2014, Silgan had approximately $275.5 million remaining under this repurchase program.
For the first quarter of 2015, Silgan projects adjusted income per share in the range of 50 to 60 cents. Net sales are expected to decrease year over year due to the impact of unfavorable foreign currency translation, lower resin prices and the shutdown of operations in Venezuela. For 2015, Silgan initiated EPS guidance in the range of $3.20-$3.40, compared with $3.17 earned in fiscal 2014; this reflects growth of 1% to 7%.
Silgan will continue to benefit from the Portola Packaging and Van Can acquisitions. Moreover, Geographic expansion and investment in capacity will aid long-term growth. Increasing productivity and cost reduction initiatives, such as the Can Vision 2020, will also enhance the company’s performance. However, high debt-to-capitalization ratio and foreign exchange volatility remain concerns.
Stamford, CT-based Silgan is a leading manufacturer of consumer goods packaging products, operating 81 manufacturing facilities across the Americas, Europe and Asia. In North America, Silgan is the largest supplier of metal containers for food products and a major supplier of plastic containers for personal care products.
Silgan currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include AO Smith Corp. AOS, Astec Industries, Inc. ASTE and Briggs & Stratton Corp. BGG. All these stocks carry a Zacks Rank #2 (Buy).
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