Owens-Illinois Surges on Acquisition

After the close, Owens-Illinois OI announced the acquisition of Brazilian glass producer Conpanhia Industrial de Vidros (CIV) for $603 million in cash. In a report from J.P. Morgan, OI forcasts a contribution of about $200 million in yearly sales from the acquisition. Analysts think this acquisition is good for OI and is consistent with the company's strategy to increase presence in emerging markets. J.P. Morgan has an Overweight rating and increased their price target to $36 on OI. Citigroup said the acquisition is definitely positive as OI continues to expand into other markets. The emerging markets are high growth regions where there tends to be better risk-adjusted return potential than in most developed markets. Brazil has the fastest grown economy in the Western Hemisphere. Citigroup maintains a Buy rating and a $35 price target on OI. In a recent report, Jefferies & Co. thought the acquisition is a great strategic fit. Growth is clearly slowing in the developed markets so it's necessary to deploy capital with investments in the emerging markets due to faster growth, higher margins, and better returns. Jefferies maintains a Buy rating on OI with a price target of $41. Owens-Illinois closed yesterday at $26.50