Crown to exit plastic closures business

By Phil Taylor

- Last updated on GMT

Related tags Europe

Packaging company Crown Holdings is planning to sell its plastic
closures business for approximately $750 million to European
private equity firm PAI partners.

Crown's Global Plastic Closures business designs, manufactures and sells plastic closures for a range of industries, including the pharmaceutical, food and beverage and industrial sectors.

Crown​ had earlier said it planned to retain the business, despite engaging in a series of divestments as it trimmed down to focus on core businesses such as metal cans. But analysts suggested that the escalating market price of plastic resins - used to make the plastic closures - may have changed its mind.

Indeed, the plastic packaging sector - and specifically the market for caps and closures - is tipped for significant consolidation, according to a report published recently by AMI.

AMI estimates​ that as many as 200 companies could move out of closure production in Western Europe over the next five years, as their larger competitors achieve economies of scale in producing cheaper products.

For example, in May, Berry Plastics announced plans to acquire Kerr Group in a €356m deal aimed at boosting its position in the plastic packaging market, while UK-based packaging giant Rexam expanded its plastics business with the acquisition of Plastic Omnium Medical in 2004.

Crown's plastic closures business has 29 facilities located in 15 countries across Europe, the US and Asia with approximately 3,500 employees. For the twelve months ended December 31, 2004 total revenues for the business were $676m (€555m) with approximately 76% derived from sales in Europe.

The company's activities in pharmaceuticals are represented mainly via its Zeller Plastics subsidiary - which makes dispensing systems, snap-hinge, tube, child resistant and tamper evident closures as well as droppers - as well as Astra and UCP (United Closures and Plastics).

PAI Partners said it plans to expand the plastic-closures unit "principally through significant investments in new product developments, through cross-selling synergies between Europe and the US, expansion in faster growing markets such as Eastern Europe and Asia, and through selective add-on acquisitions."

Meanwhile, Crown said net cash proceeds from the sale, expected to be about $650 million, would be used for corporate purposes, including debt repayment.

The transaction is expected to close later this year.

Healthcare applications are expected to be one of the main drivers behind a 28 per cent growth in the volume of plastic resins used in packaging between now and 2009, according to market research​ published towards the end of last year.

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