Pactiv sells part of its packaging business to private equity

Pactiv Corporation today announced an agreement to sell substantially all of its North American and European protective and flexible packaging for approximately $530 million

28/06/05 Pactiv Corporation today announced an agreement to sell substantially all of its North American and European protective and flexible packaging businesses to an affiliate of AEA Investors LLC, an international private equity firm, for approximately $530 million and the assumption of certain liabilities, or 6.8 times 2004 EBITDA. Product lines in these businesses include air cushioning, air padded mailers, foam, Hexacomb kraft honeycomb, flexible packaging, and hospital supplies. In 2004 these businesses had sales of $838 million and operating income of $60 million excluding restructuring and other charges. The Company is retaining its European molded fiber business and Asian operations, which had been part of the Protective and Flexible segment. In 2004 these retained businesses had sales of $120 million and operating income of $15 million excluding restructuring and other charges.

“The sale of these businesses represents an important step in Pactiv’s strategy to grow its higher return consumer, foodservice, and food packaging businesses. We believe Pactiv will be a stronger, more focused company with increased financial flexibility and better growth prospects as a result of this divestiture,” said Richard L. Wambold, chairman and chief executive officer of Pactiv Corporation.

Because of management initiatives on productivity, service, and product quality over the past few years, the divested businesses have seen improving sales and margins and are well positioned for growth as an independent company. “This is an exciting opportunity for our customers, employees, and new investors,” said James D. Morris, Pactiv’s senior vice president and general manager, Protective and Flexible Packaging, who will become chief executive officer of the new venture at closing. “With a shared strategic vision and a desire for continued sales and earnings growth, AEA is dedicated to continue to build on the strong market positions of these businesses,” Morris concluded.

The transaction is expected to close in the third quarter and is subject to normal regulatory approvals and customary conditions to closing. Proceeds of the transaction will be used for acquisitions, share repurchase, and other corporate purposes.