Silgan to Acquire - Analyst Blog

Silgan Holdings Inc. (SLGN) has agreed to purchase the food can business of Vienna, Austria-based Vogel & Noot Holding for 250 million euros (approximately $335 million). The transaction is expected to be modestly accretive to Silgan's 2011 earnings.

The transaction is expected to close in the first quarter of 2011, pursuant to closing conditions. Silgan will fund the acquisition by cash and euro denominated revolving loan borrowings under its senior secured credit facility. The purchase price translated to approximately 6.5 times the projected EBITDA of the Vogel & Noot food can business, recognizing the expected future earnings of the locations under development. The consideration is, however, subject to adjustment for net debt and financial performance of the business.

Vogel & Noot operates 12 food can manufacturing facilities throughout Central and Eastern Europe with more slated to come into operation in the future. The company's solid footprint in this part of Europe will thus enhance Silgan's metal food can position in these key markets as well as globally.

Silgan is the largest manufacturer of metal food containers in North America, hogging half of the total volume market share in the United States in 2009. Silgan's metal food container business generated sales of $1.92 billion (approximately 62% of total sales) in fiscal 2009. In the nine months ended September 30, 2010, the business recorded revenues of $1.44 billion (61% of total revenues).

Silgan has increased its sales and market share through acquisitions as well as internal growth, and in the process expanded and diversified its customer base, geographic presence and product lines. Silgan's share of the U.S. metal food container market went up from around 10% in 1987 to approximately half of the market in 2009. In addition to acquisitions, Silgan continues to make significant capital investment in its metal food container business and offer its customers value-added features.

The company is currently undertaking various corporate development activities, including manufacturing efficiencies, which are likely to improve volumes further across all of its segments. We expect volumes to gradually recover with the improving economy. We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.

Silgan is a leading manufacturer of consumer goods packaging products operating 68 manufacturing facilities in North and South America, Europe and Asia. In North America, Silgan is the largest supplier of metal containers for food products and a leading supplier of plastic containers for personal care products.

In addition, Silgan is a leading worldwide supplier of metal, composite and plastic vacuum closures for food and beverage products. It operates through three segments, namely Metal Food Containers, Closures and Plastic Containers. Silgan competes with the likes of Ball Corporation (BLL), Crown Holdings Inc. (CCK) and privately held Berry Plastics Corporation.

 
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