Rexam swoops to O-I rescue

By Anna Lewcock

- Last updated on GMT

Related tags Rexam Bottle

Major packaging player Rexam this morning announced that it will be
scooping up the plastics business of beleaguered firm
Owens-Illinois in a deal worth almost $2bn (€1.5bn).

After media reports last week forced Rexam to release a statement admitting it was indeed " in discussions " with Owens-Illinois (O-I) regarding the potential acquisition of O-I's plastics division, the companies this morning announced that the deal would be going through, with a price tag of around $1.8bn.

O-I announced that it was exploring " strategic alternatives " for its plastics division back in January, though analyst estimates on the potential sale were more conservative than the Rexam deal, coming in around the $1.2-1.5bn mark.

At the time, an O-I spokesperson told in-PharmaTechnologist.com that they didn't think the market was " reflecting the full value of the business ", so presumably the slightly higher price achieved will have proved more satisfying.

The purchase is set to transform Rexam's plastics business, providing them with a host of manufacturing facilities and ensuring them a significant foothold in the US market.

Rexam itself focuses primarily on rigid plastic packaging, serving the pharmaceutical, food, beauty and food industries.

The purchase of O-I Plastics will put Rexam at the top of the packaging tree in the healthcare packaging and closures markets, and according to the company will add around $40m extra revenue per year to its books by 2010.

Back in March Rexam shed its glass business for €660m, the proceeds of which have gone towards the O-I purchase.

With the company's pharma division already providing Rexam with operations in Europe, the US and India, the addition of O-I's assets now means that the firm will have "the critical mass required to be an effective global player in rigid plastic packaging" .

As over 90 per cent of O-I Plastics' sales and profits are generated in the US, the Rexam purchase will also help globalise the unit's products.

O-I Plastics currently operates 19 manufacturing plants (including one under construction in Malaysia), 14 in the US and Puerto Rico, and the others in Brazil, Mexico, Hungary and Singapore.

O-I Plastics currently designs, manufactures, assembles and sells products such as pharmaceutical containers, ophthalmic bottles, parenteral packaging, vials and child-resistant closures.

The business is also in the process of developing new products, such as radio frequency identification (RFID)-tagged pharmaceutical containers and multi-layer injection blow-molded diagnostic vials.

As for O-I, the sale will add some relief to the cumbersome debt the company has been shouldering for some time.

Despite a new management team, the sale of various business units and the calculated consolidation of its European operations, the company is still sitting on several billions dollars' worth of debt.

"We believe this is a significant opportunity for O-I to finally delever its massive debt load, and refocus the company on turning around its core glass container business," commented senior analyst Ghansham Panjabi of Wachovia Capital Markets when confirmation of the potential sale broke on Friday.

The transaction is expected to close early in the third quarter, and, confirming analyst conjecture, O-I will use the lion's share of the proceeds to reduce senior secured debt maturing in 2009, 2011 and 2012, and concentrate on resources to improve its glass business.

According to Rexam, the rigid healthcare packaging market in the US alone is worth around $4bn, and is growing at an annual rate of around 7 per cent with demand for some products (such as dry powder inhalation devices) anticipated to experience double-digit growth.

The markets for pre-fillable syringes and medical and diagnostic components and containers are estimated to be growing at over 10 per cent each year, while the market for prescription containers is more modest, at 1-2 per cent per annum.

With this healthy growth rate and Rexam's already established position in the packaging market, this latest acquisition is set to help Rexam significantly bolster its presence in the sector as well expand its product offering to an international customer base.

Related topics Drug Delivery Processing equipment

Related news

Show more

Related products

Efficient Freezing & Storage of Biopharmaceuticals

Efficient Freezing & Storage of Biopharmaceuticals

Content provided by Single Use Support | 06-Nov-2023 | White Paper

Various options exist for freezing biopharmaceutical bulk material, but selecting the most effective and efficient approach for each cold chain can be...

Follow us

Webinars

Headlines