Sonoco Products Company
(SON - Free Report
) recently completed its previously announced acquisition of the remaining 70% interest in the Conitex Sonoco joint venture (“JV”) as well a composite can plant in Spain, for approximately $143 million in cash. This move not only strengthens Sonoco’s existing global paper-based tube and core business but also enhances its industrial presence in Asia.
Conitex Sonoco: A Successful Venture
The Conitex Sonoco JV was formed between Sonoco’s former North America textile cone business and Texpack, Inc., a Spanish global provider of paperboard and paper-based packaging products, almost two decades ago.
The JV currently operates from 13 manufacturing locations spanning 10 countries. This includes four paper mills, seven cone and tube converting operations, and two other production facilities. It is a global leading manufacturer of paper-based cones and tubes used in the textile industry. It also produces adhesives, flexible intermediate bulk containers and corrugated pallets.
In 2017, the JV reported total sales of around $245 million and churned out more than 300,000 tons of uncoated recycled paperboard in 2017. This in turn produced approximately 1.4 billion tubes and cones for the global spun yarn industry.
Benefits for Sonoco
The acquisition of Conitex Sonoco will assist the company in expanding manufacturing presence in the Americas, Europe, and rapidly growing emerging markets in Asia. It will also help build strong customer relationships by offering innovative packaging solutions in paperboard, textile carriers and other value-added products.
The buyout will be modestly accretive to Sonoco’s earnings in 2018. Conitex Sonoco’s financial results will be reported within Sonoco’s Paper and Industrial Converted Products segment while the Spanish composite can operation will be included in the Consumer Segment.
Acquisitions: A Key Catalyst
On Apr 12, Sonoco completed the acquisition of Highland Packaging Solutions — a leading manufacturer of thermoformed packaging for fresh fruits, vegetables and eggs — for approximately $150 million. This purchase reinforced the company’s thermoforming business.
The company also acquired Clear Lam Packaging in July 2017 and completed the acquisition of Peninsula in March 2017. The Clear Lam buyout is likely to expand Sonoco’s Flexible Packaging and Thermoforming Plastics operations significantly. The acquisitions will also bolster Sonoco’s thermoforming capabilities and expand presence into the fast-growing perimeter of the grocery store.
Share Price Performance
Sonoco’s shares have gained around 9% in the past year, against the industry
’s decline of 2% .
Zacks Rank & Key Picks
Sonoco currently carries a Zacks Rank #3 (Hold).
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