Rexam said it was the “right time” to exit their plastic thermoformed business, leaving the firm with a 90% focus on the beverage can sector.
Rexam sold the business, which is part of their High Barrier Food (HBF) packaging segment, to Silgan Holdings for US$250m (€200m).
In a further development, the firm said it would concentrate its efforts on increasing operations in emerging markets for aluminium can production, which now makes up the majority of operations.
The transaction is expected to close in the third quarter of 2012 and is part of the sale of its Personal Care business for a cash total of $709m.
The sale will see 90% of Rexam’s business dedicated to the beverage can sector with 10% focused on healthcare.
The HBF business manufactures thermoformed containers from Missouri for distribution globally and employs more than 300 people worldwide.
Cash returned to shareholders
The majority of the $250m will be returned to shareholders with the transaction subject to certain adjustments at completion.
Jonathan Thornton, head of communications at Rexam, told FoodProductionDaily.com the firm announced their decision to exit the personal care business earlier this year.
“In our first quarter results in February this year we conducted a strategic review on personal care with the HBF business included to focus on our returns business as a whole and identified it as attractive and well-run but we felt it could generate better returns elsewhere.”
Rexam said they will carry out a restructuring programme to remove residual overheads which will give rise to an exceptional charge of £40m in 2012, of which £25m will be cash costs.
When asked if it was the right time to exit the sector, Thornton said: “Yes it is the right time to exit, we performed the strategic review and looked at our internal and external targets as part of our long term plans.
“We will look to build on and focus on our current beverage can products in the market, where there are growth regions and stable regions.”
Thornton explained the $7m of annual retained fixed costs which will be absorbed by the Beverage Cans and Healthcare businesses included things such as IT and office costs.
Speaking to UK newspaper The Financial Times, Graham Chipchase, chief executive of Rexam, said it is exploring options for increasing its aluminium can production operations in emerging markets including Africa, India and the Middle East.
He said Rexam was keen to add to the output of its can factories in parts of the world where consumption per person of beer and fizzy drinks was growing relatively fast.
Silgan: business prospects
Silgan said the business has anticipated sales of approximately $100m this year in providing thermoformed packaging solutions such as retortable bowls and barrier trays to packaged food and ready-meal companies.
The firm added they expect the purchase to be neutral to their 2012 earnings and modestly accretive to earnings in 2013 based on current growth expectations.
"This business is uniquely positioned for the growing demand in the ready-meals market through its low cost technology which meets the rigorous requirements of the shelf-stable food market,” said Tony Allott, Silgan president and CEO.
“The ability to provide our existing customers with product line extensions that offer convenient, on-the-go capabilities makes it an excellent fit within the Silgan suite of products.”
An affiliate of Sun Capital Partners, a private equity firm, made a binding offer for the Cosmetics, Toiletries and Household care products business (CTH) for a cash total of $459m to complete the sale of Rexam's personal care segment.