O-I Acquires Brazilian Glass Company
September 3, 2010
by Canadian Packaging Staff
Owens-Illinois, Inc. (O-I), headquartered in Perrysburg, OH, has announced the acquisition of Brazilian glassmaker Companhia Industrial de Vidros (CIV), in a move that significantly expands O-I’s reach in South America’s largest container market.
CIV is the leading glass container producer in northeastern Brazil, one of the country’s fastest-growing regions. The acquisition includes two plants in the state of Pernambuco and one in the state of Ceará and boosts O-I’s capacity in Brazil by approximately 50 per cent. The plants employ approximately 1,300 people and produce glass containers for the beverage, food and pharmaceutical industries, as well as tableware.
Under the terms of the agreement, O-I is purchasing CIV’s glass container business for US$603-million, which includes future tax benefits with an estimated present value of US$140-million. These tax benefits include federal and state incentives for development in Brazil’s northeastern region.
In the first full year of operation, O-I expects the acquisition will boost regional net sales by approximately US$200-million. The return on investment is expected to exceed O-I’s cost of capital. The purchase price reflects a 5.8 times EBITDA multiple for the first year of operation, excluding the present value of future tax benefits and including estimated net cost savings.
“The acquisition of this well-managed company in South America – our fastest-growing and most profitable region – directly supports our strategy of expanding our presence in emerging markets with robust earnings growth potential,” states Al Stroucken, O-I chairman and chief executive officer. “Our recent expansions in Argentina, China, Malaysia and Vietnam, as well as the opening of new furnaces in Peru and New Zealand, clearly demonstrate our commitment to these rapidly growing regions and the opportunities they offer.”
O-I South America president Andres Lopez says the expanded Brazilian footprint also aligns with unfolding consumer trends and customer growth plans. “Economic development and increased consumer purchasing power is driving significant growth in the Brazilian container market. Our customers are expanding their operations, and this acquisition enables us to serve them, as well as new customers, more effectively. After we’ve implemented our advanced technology and lean manufacturing principles, we fully expect to boost productivity in the new plants,” said Lopez.
Highlights of the acquisition and additional market-related data are available at www.o-i.com/investorrelations.