Plastics packaging: Pactiv takes over PWP

For Pactiv (Lake Forest, IL), the acquisition especially strengthens its position in the baked goods and foodservice markets. PWP's 2009 sales were about $149 million. The company has three processing facilities: one in Texas, West Virginia and its headquarters site in Vernon, CA. It employs approximately 600, and extrudes much of the film it processes.

PWP has scored well many times at SPE thermoforming competitions, indicative of the company's design and thermoforming skills. Also attractive about PWP are its polyethylene terephthalate (PET) recycling facilities in West Virginia and one to be built in California, as these can provide lower-cost feedstock to PWP for its extrusion and subsequent thermoforming. The West Virginia PET recycling site is located only three miles from a PWP processing facility in that state. Read more on PWP's PET recycling operations in our article here. 

According to Pactiv, the acquisition is expected to be modestly accretive to earnings per share and free cash flow in 2010 and generate a return in excess of Pactiv's cost of capital within two to three years. The transaction is expected to close in the first quarter.

Pactiv runs 46 production facilities and employs some 12,000, with annual sales of $3.4 billion. Its Hefty-brand bags and disposable plates accounted for 38% of its 2009 sales, with sales into food service and food packaging branches accounting for the remainder of sales. The processor is now the sole supplier of store-brand trash bags to Wal-Mart.

In a presentation on February 24 at the Credit Suisse annual global paper and packaging conference, a day after Pactiv announced the purchase, Pactiv officials claimed compound annual growth rates of 6.6% in the last five years for the Hefty products and 5.2% CAGR for its other product lines in the same period, with profit CAGR even higher. In 2009 Pactiv saw its volume of sales grow by 3.2% and its earnings per share hit $2.31, the highest ever for the NYSE-listed company. —Matt Defosse