Owens-Illinois Inc., the world’s largest maker of glass containers, agreed to buy the food-and-beverage glass business of Vitro SAB for about $2.15 billion to extend its reach in Mexico.
The all-cash transaction is expected to close within a year, Owens-Illinois said Wednesday in a statement. The deal still needs approvals from shareholders of Vitro, Mexico’s biggest producer of glass containers. Owens-Illinois rose 9.2 percent to close at $25.98 in New York. Vitro surged 20 percent, the most in five years, to a record closing price of 42.49 pesos in Mexico City.
Competition for food-packaging industry assets is intensifying with a string of deals such as Rock-Tenn Co.’s agreement in January to acquire MeadWestvaco Corp. in a transaction valued at about $8.5 billion to create the world’s second-biggest packaging company. France’s Cie. de Saint-Gobain SA is selling its Verallia glass-packaging unit.
With a projected $945 million in extra annual revenue, this deal could help Owens-Illinois boost yearly sales for the first time since 2011, it said. The Perrysburg, Ohio-based company said it may initiate a dividend after the first year as it reduces debt. The company will add Vitro’s five Mexican plants, one in Bolivia, and retain the unit’s management.
Owens-Illinois said the Vitro assets are expected to generate earnings before interest, taxes, depreciation and amortization of $278 million, implying an Ebitda multiple of at least 7.7. The median multiple in 15 glass- and metal-packaging completed in the past 5 years was 6.5, according to data compiled by Bloomberg.
For Vitro, the deal is the first major sale of a business since settling a legal duel in 2013 with U.S. creditors including hedge-fund manager Paul Singer over the company’s 2009 default. Vitro, based in the Monterrey suburb of San Pedro Garza Garcia, disclosed that it was in talks about a sale of the food-and-beverage unit in 2014 without identifying the suitor.
Vitro, which opened its first bottle-making plant in 1909, will retain its car-windshield and construction-glass operations. The company is partially owned by Fintech Advisory Inc., a hedge fund founded by David Martinez.
Excluding the container business it’s selling, Vitro will have estimated 2015 sales of $865 million with earnings before interest, taxes, depreciation and amortization of $165 million, the company said in a statement. Last year, it had revenue of $1.69 billion with Ebitda of $366 million.
Alfaro, Davila y Rios SC acted as Vitro’s financial adviser while Cleary Gottlieb Steen & Hamilton LLP was its legal adviser, Vitro said. Deutsche Bank AG is Owens-Illinois’s financial adviser on the acquisition and Simpson Thacher & Bartlett LLP is its legal adviser.