Transcontinental to diminish role of printing
Transcontinental Inc. is taking a big leap in its strategic shift towards flexible packaging with the company’s largest ever deal that would diminish the role of commercial printing that has been the cornerstone of the company since its founding 42 years ago.
The US$1.32 billion purchase of Coveris Americas will make it North America’s seventh-largest packaging company.
The deal announced Monday after a lengthy auction process complements and bolsters Transcontinental’s product offering particularly in dairy, pet food and consumer products and adds agriculture, beverage and protein, said Francois Olivier, chief executive officer of TC Transcontinental.
“We will diversify our packaging capabilities and product offerings, which will enable us to increase our share-of-wallet with our existing customers,” he said during a conference call.
Olivier said its customer base will broaden and include some large, market-leading customers.
He said that the cash deal, worth C$1.72 billion, will build on the two companies’ combined
strengths.
Transcontinental estimated it can achieve US$20 million of cost-savings over a 24-month period, including half in the first year.
As of the end of 2017, Chicago-based Coveris Americas employed more than 3,100 people at 21 production facilities worldwide, including 14 in the U.S. and one that employs 140 in Whitby, Ont. The rest are in Ecuador, Guatemala, Mexico, the United Kingdom, New Zealand and China.
Olivier said there could be an
opportunity to import into the U.S. some Coveris technology used in South America that has active ingredients in the plastics primarily for growers to protect their crops.
Transcontinental employs more than 1,000 people at seven packaging facilities, including one announced last month and two in Canada that employ 180.
Coveris generated US$966 million in revenue last year and US$128 million in adjusted earnings before taxes and other expenses (EBITDA).
“This transaction crystallizes our strategic shift toward flexible packaging and solidifies our commitment to profitable growth,” Isabelle Marcoux, chairwoman of Transcontinental’s board, said in a statement.
The Coveris deal is subject to applicable anti-trust approvals and is expected to be completed by July.
Drew Mcreynolds of RBC Dominion Securities says the deal moves the needle on Transcontinental’s packaging exposure.