Ardagh set to make $1.7bn US acquisition
Glass and metal packaging manufacturer Ardagh is poised to make its biggest acquistion in more than two years after agreeing to pay €1.275 billion for a US rival.
The Luxembourg-based and Irish-backed group has announced that it has signed an irrevocable offer and entered exclusive talks with Saint Gobain to buy glass manufacturer Verallia North American (VNA) from the French building materials business.
Ardagh said the deal would be worth about $1.7 billion (€1.275 billion), which would make it the largest purchase made by the group since it bought rival Impress Co-Operative in September 2010, for €1.7 billion, from private equity group Doughty Hanson.
Saint Gobain has to call a meeting of its works council to hold mandatory consultations in relation to the offer.
US competition regulators will also have to approve the sale of VNA to Ardagh, which has already built up a strong position in the north American market.
If the sale goes ahead, Ardagh expects it to be completed by the end of this year.
There has been speculation for some time that Saint Gobain would sell Verallia, whose operations are not central to its cement and building materials business. Verallia is a glass bottle and container manufacturer with operations in Europe, Africa and North and South America.
Ardagh is only buying the US division, which has sales of €1.2 billion a year and produces nine million units annually from 13 factories and which employ 4,400 people, selling its products to the food and drink industries.
A deal would expand Ardagh’s presence in the US and increase the size of its overall glass business by about 60 per cent. It would also mean that about 40 per cent of Ardagh’s sales and earnings would come from the US.
Chief executive Niall Wall said yesterday it would also expand its glass operations into the US wine industry. The US is the fourth-biggest producer of wine in the world. Much of the industry is based in California, where VNA has a factory.
Ardagh plans to borrow $1.45 billion through euro- and dollar-denominated bond sales to fund the deal. The group has already begun a roadshow for potential purchasers of its bonds.
Ardagh generally funds its acquisitions in this way.
Welcoming news of the deal, chairman Paul Coulson said the acquisition of Verallia would be an important milestone in the group’s evolution.
In its trading update, the group said that overall sales increased by “mid single-digit percentage” in the last quarter of 2012.
Much of the growth came in the glass business, while the metal container operations were flat or slightly down.
Ardagh, which makes glass bottles and containers and metal packaging for the food and drink industries, said yesterday that sales in the last three months of 2012 were higher than in the final quarter of 2011, while earnings were marginally ahead over the same period.
Ardagh has sales of €5.4 billion and its customers include AB InBev, Heineken, Diageo, Pernod Ricard, Bacardi Martini, Heinz, Nestlé, Coca Cola and other international brands.