Moody’s affirms US Bemis after $1.2bn Food Americas deal

21 July 2009 19:34  [Source: ICIS news]

TORONTO (ICIS news)--Moody’s has affirmed the ratings of US packaging firm Bemis, with a negative outlook, following Bemis’ $1.2bn (€840m) acquisition this month of Alcan Packaging’s Food Americas operation, it said on Tuesday.

The credit ratings agency also assigned a Baa1 rating to Bemis’ new senior unsecured notes of $800m to partially finance the acquisition, it said.

“The acquisition will enhance the company's already strong competitive position, bring some complementary product lines and diversify the company's product offerings,” Moody’s said.

Also, Bemis was expected to generate significant synergies and realise savings from cost-cutting initiatives, the ratings service said.

The Chicago-based Food Americas division employs a staff of 4,600 at 23 sites in the US, Canada, Mexico, Brazil, Argentina and New Zealand. It had revenues of $1.5bn last year, accounting for 23% of Alcan Packaging's total revenues.

The negative outlook reflected Bemis' relatively weak operating margins, Moody’s said.

Over the near term, Bemis’ margins may be constrained by economic softness, weakness in certain segments and competitive pressures, it said.

Also, Alcan had lower margins than Bemis and improving pricing may be constrained by contract structures or past practices.

Additionally, it was likely that Alcan was facing similar pressures as Bemis in certain segments of its business, Moody’s noted.

Mining firm Rio Tinto, which acquired its Canadian rival Alcan in 2007 for $38bn, had said at the time it planned to sell the Alcan packaging business.

Wisconsin-based Bemis is an international manufacturer of flexible packaging products and pressure sensitive materials in the Americas and Europe, with a growing presence Asia Pacific.

In June, Bemis’ subsidiary American Plast said it was acquiring Huhtamaki Argentina to improve its business in Argentina's rigid-plastic consumer-goods markets.

($1 = €0.70)

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By: Stefan Baumgarten
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