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Silgan (SLGN) Acquires Easytech, Expands Metal Ends Capacity

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Silgan Holdings Inc. (SLGN - Free Report) has acquired Easytech Closures S.p.A. for $36.5 million. This buyout will enable Silgan to efficiently utilize its existing capacity for metal ends, reduce capital investment and accelerate the company’s cost-reduction program.

Based in Fisciano, Italy, Easytech is a leading manufacturer and seller of easy-open and sanitary metal ends, which are used with metal containers, mainly for food applications in the European markets. The company is predicted to generate revenues of around $45 million and adjusted EBITDA of $7.8 million in the current year.

Silgan expects to realize annual synergies of $4.9 million from this acquisition within one year, primarily through procurement savings and capacity utilization. Management funded the deal with the revolving loan borrowings under its senior secured credit facility. The latest acquisition supports the company’s focus on building shareholder value through a disciplined capital-allocation approach. The acquisition is anticipated to provide a slight lift to Silgan’s earnings this year, and be accretive to the same next year.

Recently, Silgan acquired Unicep Packaging for $237 million. The buyout expands Silgan’s precision dosing capabilities and extends the range of its comprehensive product offering into the new and existing markets. The Unicep business magnifies Silgan’s exposure to the health care and the Point-of-Care diagnostics markets, and complements its global Dispensing and Specialty Closures franchise.

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. Along with Easytech, both of the above-mentioned buyouts are likely to be slightly accretive to the company’s current-year earnings. It is on track to integrate these three acquisitions.

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 demand growth 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. The segmental income is expected to increase significantly in 2021, compared to the prior year, primarily owing to the inclusion of the dispensing operations of Albea. New business gains, improved manufacturing efficiencies and a higher pension income will also drive the segment’s income. The Metal Container segment’s income in 2021 is likely to modestly improve year over year on the current solid demand and the manufacturing-improvement efforts. The Custom Containers segment continues to benefit from a favorable product mix, and anticipated higher volumes, backed by new business wins and continued manufacturing efficiencies. These gains will help counter the inflated material costs and labor-supply challenges, which might persist through the year.

Price Performance

The stock has gained 4.7% so far this year, against the industry’s decline of 1.6%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

Silgan currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Industrial Products sector include Alcoa Corporation (AA - Free Report) , The Manitowoc Company, Inc. (MTW - Free Report) and Deere & Company (DE - Free Report) , each sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alcoa has an estimated earnings growth rate of 573.2% for 2021. The company’s shares have rallied 121.2% so far this year.

Manitowoc has an expected earnings growth rate of 340% for 2021. The stock has appreciated 69.2% year to date.

Deere has a projected earnings growth rate of 117.5% for fiscal 2021. So far this year, the company’s shares have gained 32.2%.


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