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Silgan (SLGN) Buys Unicep Packaging, Expands Capabilities

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Silgan Holdings Inc. (SLGN - Free Report) recently announced that it has acquired Unicep Packaging, which develops unit-dose packaging for a variety of consumer and professional products for $237 million. The buyout expands Silgan’s precision dosing capabilities and extends the reach of its comprehensive product offering into new and existing markets.

Unicep, from its manufacturing facilities in Spokane, WA and Sandpoint, ID, develops, manufactures and sells precision dosing dispensing packaging solutions. These include diagnostic test components, oral care applications and skin care products. Its products cater to the health care, diagnostics, animal health, oral care, skin care and beauty markets. Unicep is expected to generate around $45 million in sales and $18.3 million in adjusted EBITDA this year.

The Unicep business increases Silgan’s exposure to health care and Point-of-Care diagnostics markets and complements its global Dispensing and Specialty Closures franchise. Silgan anticipates realizing tax benefits having a net present value of approximately $35 million. The company funded the buyout with revolving loan borrowings under its senior secured credit facility. This Unicep Packaging acquisition is expected to provide a slight boost to Silgan’s earnings this year, and be accretive to earnings next year.

Last month, Silgan acquired Gateway Plastics for $485 million to expand its wide range of product offerings in the Dispensing and Specialty Closures business. The company projects to realize tax benefits of $90 million from this buyout. Annual synergies of approximately $2 million are expected within 12 months of the acquisition. Last June, Silgan acquired Albea’s dispensing business to strengthen its position in the dispensing markets. It expects to realize annual run-rate operational cost synergies of $20 million from this buyout by the end of 2021. These acquisitions and investments in several capacity expansion projects for dispensing triggers and pumps will aid Silgan to tap the significant growth in demand for health and hygiene products.

Silgan’s Dispensing and Specialty Closures segment will gain from the ongoing recovery in the beverage, beauty and fragrance markets. Segment income is expected to increase significantly in 2021 compared to the prior year primarily due to the inclusion of the dispensing operations of Albéa. New business gains, improved manufacturing efficiencies and higher pension income will also drive the segment’s income. The Metal Container segment’s income in 2021 is expected to modestly improve year over year on the current solid demand, and manufacturing improvement efforts. The Custom Containers segment continues to benefit from favorable product mix, and anticipated higher volumes backed by new business awards and continued manufacturing efficiencies. These gains will help counter inflated material costs and labor supply challenges, which are anticipated to persist through the year.

Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

The stock has gained 3.5% so far this year against the industry’s decline of 1.7%.

Zacks Rank & Stocks to Consider

Silgan currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Industrial Products sector are Belden Inc. (BDC - Free Report) , Kadant Inc. (KAI - Free Report) and Alcoa Corporation (AA - Free Report) , all of which sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Belden has an estimated earnings growth rate of 63.6% for the current fiscal. The company’s shares have risen 39% year to date.

Kadant has a projected earnings growth rate of 48.2% for fiscal 2021. So far this year, the company’s shares have gained 45%.

Alcoa has an estimated earnings growth rate of 601.7% for the current fiscal. The company’s shares have appreciated 112% so far this year.

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