Silgan Closes Nestle Assets Buy

Silgan Holdings Inc. (SLGN - Analyst Report) closed the deal to buy the steel can making assets of Nestle Purina PetCare Company for $25 million. In addition, it has also inked a long-term supply agreement with Nestle Purina PetCare Company.

The synergies from the transaction are already incorporated in the earnings guidance as Silgan had already started supplying cans to Nestlé Purina for qualification purposes. Silgan guided third quarter adjusted earnings to a range of $1.05 to $1.15 per share and full year adjusted earnings to a range of $2.60 to $2.70 per share. Silgan estimates that in 2011 approximately 90% of its projected metal food container sales in North America will be under multi-year customer supply arrangements.

The Zacks Consensus Estimate for third-quarter 2011 is $1.12 per share. For full year 2011, the Zacks Consensus Estimate is $2.66 per share.

Silgan holds a dominant position in the supply of metal containers in North America and Europe. Also, the company is a leading worldwide supplier of metal, composite and plastic vacuum closures for food and beverage products.

The company’s growth since its inception has primarily been driven by acquisitions. The affiliation with Nestle will thus augment its leadership position in food cans. The company will also be able to capitalize on the expansive manufacturing facilities and hence offer a competitive edge to the customers.

Previously, in March, Silgan completed the acquisition of the food can business of Vienna, Austria-based Vogel & Noot Holding for 250 million euros (approximately $358.8 million). With this acquisition, Silgan will be a leading manufacturer of metal containers in North America and Europe.

Besides the metal food container business, Silgan also strengthened its position in the plastic container and closures businesses through strategic acquisitions.

We retain a Neutral recommendation on Silgan Holdings. The quantitative Zacks #3 Rank (short-term Strong Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Based in Stamford, Connecticut, Silgan Holdings is one of the leading North American manufacturers of metal and plastic consumer goods packaging products. Its products are used for a wide variety of end-markets and it is the largest metal-container supplier for food products in North America. The company competes with Ball Corporation (BLL - Analyst Report) and Crown Holdings Inc. (CCK - Snapshot Report).

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