Monday, July 02, 2007

PET gin rummy That's PET in the sense of polyethylene terephthalate, the material used to make soft drink bottles. We have yet another big plastics deal. The leading plastic soft-drink bottle maker in the world and a major packaging company, Australia's Amcor, announced it would sell off its European PET operations to La Seda de Barcelona, a Spanish company and already the largest PET plastic maker in Europe. The deal is for $545 million. It's a classic case of one company getting rid of an asset not producing the return it wants and another buying a piece that will increase its regional dominance enough to make it worthwhile to pay a generous price. As a Wall Street Journal article explains ("Spain's Seda to Acquire Amcor's European PET Business, " 7/2/07) The company has been restructuring its business as earnings have been crimped by higher costs for transport, energy, pulp and resin. As part of its three-year restructuring program, Amcor has been improving the efficiency of its Latin American soft-drink bottle unit, Australasian fiber-packaging businesses, and European flexibles, which comprise cardboard and aluminum foil-backed packaging for food, tobacco and drugs. Amcor became #1 in the PET business in 2002 when it bought a division of Germany's Schmalbach-Lubeca AG. At the same time, Schmalbach-Lubeca was bought out by packaging giant Ball Corporation, a move that made Ball the leading provider of beverage cans, Amcor will hold on to the US PET assets it got from that purchase. In other areas Amcor has been retrenching, closing 10 factories and spinning off operations (Australian PET and a corrugated cardboard busienss La Seda, named for its production of artificial silk, also produces synthetic fabrics, including polyester, viscose, and polythene. It has been expanding. It recently bought several Spanish PET factories from US-based Eastman Chemical, as well as plants in Greece and Italy. But this a vertical move -La Seda has made the plastics, but ha snot been involve din major bottle making activities Here we have two companies, one slimming down, and another fattening up. One selling off what it bought a few years ago, another expanding eagerly into the same market the other is abandoning. Another gin rummy game. 5:54:24 PM

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