AEP sees risk from recession in films acquisition

18 November 2008 16:52  [Source: ICIS news]

TORONTO (ICIS news)--The recession is the primary risk weighing on AEP Industries’ $99.2m (€78.4m) acquisition of the Atlantis Plastics films business, company executives said on Tuesday.

 

2008 was not a normal year and 2009 would be ferociously competitive, CEO Brendan Barba and chief financial officer Paul Feeney told analysts in a briefing.

 

“The only risk that I can identify is that we are doing this [acquisition] right in the phase of a recession which is affecting every business we do business with,” said Barba.

 

However, apart from that the acquisition was essentially “no risk”, he said.

 

With the consolidation of Atlantis’ films business, AEP would be the largest plastics films producer in North America with a total capacity of around 500m lb/year.

 

“There isn’t a single product in stretch film that the combined company can’t sell,” said Barba.

 

The transaction was expected to yield estimated $20m in synergies over three years, he said.

 

AEP closed an Atlantis 35m lb/year stretch films plant in Fontana, California, and shifted production to its near-by plant in Chino, achieving $2m-3m in synergies, the executives said.

 

The plant was one of three stretch films plants it acquired from Atlantis.

 

AEP did not expect having to make any significant investments in the business through 2009 but may invest in 2010 to upgrade some facilities, the executives said.

 

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By: Stefan Baumgarten
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