Glass container manufacturer Owens-Illinois (O-I) is buying Mexican company Vitro's food and beverage glass container business for around $2.15bn, to gain a competitive position in the Mexican glass packaging market.
O-I will acquire Vitro’s five plants in Mexico and one in Bolivia under the all-cash deal.
Vitro’s assets in cosmetics, fragrances and toiletries segment, its machinery and equipment business, and stake in the Comegua joint venture in Central America, will remain with the Mexican company.
Vitro CEO Adrian Sada Cueva said: "We are convinced that this decision will further strengthen our company, as it will allow us to improve our financial position and focus on the market segments where we’ll keep participating.
"We are confident that this transaction will offer our employees the opportunity to join and grow in Owens-Illinois."
The six plants being sold to O-I together employ 4,700 people.
According to O-I, the acquired business is estimated to generate $945m annual revenue, accretive from the first year of closing.
The transaction will be closed in a year, subject to approvals from Vitro’s shareholders, Mexico’s Federal Competition Commission and the National Foreign Investment Commission, and US’ Federal Trade Commission.
The American glass company expects to generate around $30m in cost savings by 2018, through synergies in procurement and operational efficiencies.
O-I chairman and CEO Al Stroucken said: "This transaction marks an important strategic step for O-I in that it allows us to establish a strong position in the attractive glass container segment in Mexico.
"Vitro’s leading position, long-term customer relationships and proven record of innovation and new product development will enable us to capitalize on commercial opportunities in Mexico.
"In the third year after close, this compelling transaction is expected to add approximately $0.50 to our earnings per share and at least $100m in free cash flow, positioning us to drive even greater value for shareholders."
O-I reported revenues of $6.8bn last year. It has about 21,100 employees at 75 facilities in 21 countries.
O-I has secured financing from Deutsche Bank for the transaction while Deutsche Bank Securities is serving as financial advisor.
Image: Vitro is a leading bottle manufacturer in Mexico. Photo: courtesy of BrianHolm / Freedigitalphotos.net.