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The Deal: Silgan Buys Portola Packaging for $266M

NEW YORK ( The Deal) -- Stamford, Conn. rigid packaging product maker Silgan Holdings (SLGN - Get Report) said Tuesday, Aug. 13, that it bought plastic closures and container maker Portola Packaging of Naperville, Ill. for $266 million.

Portola had sales of about $200 million for 2012 and operates eight facilities in North America and Europe. Portola specializes in tamper-evident plastic closures and plastic containers for the dairy, juice, and food industries, the buyer said.

"We believe this acquisition will be highly accretive with our existing closure business," said Silgan executive vice president and CFO Bob Lewis in a statement Tuesday.

Silgan said it would fund the deal via an existing credit facility and cash on hand. The purchase should close in September 2013 and is expected to be slightly accretive, with accretion increasing as synergies are phased in over the next 18 months.

"[There's] the opportunity to expand our relatively small European plastic closure presence through Portola's manufacturing facilities in the United Kingdom and Czech Republic," Lewis added in the release.

The buyer has been on the prowl for other packaging companies since at least October 2011, according to comments Lewis made on an earnings call around that time. Earlier that year, in April 2011, Silgan made a bid to merge with Blackstone Group (BX)-backed rival Graham Packagingfor $4.1 billion, but Graham had instead taken a $4.5 billion offer from Reynolds Group Holdings, a unit of New Zealand's Rank Group.

Silgan made two deals in 2012 as part of its expansion initiative. Those included Turkish metal container and vacuum closure company Ontas Oner Teneke Ambalaj Sanayi ve Ticaret AS in July 2012 for $18.2 million, and Rexam High Barrier Food Containers, the plastic food container operations of London's Rexam Plc, in August 2012 for $250 million.

Silgan posted second quarter earnings of $59.5 million, or 93 cents per share, up from $10.6 million, or 15 cents per share a year ago. Excluding special items, earnings were 63 cents per share, up from 55 cents per share a year ago. Total sales for the quarter were $880 million, a 7% increase from $821.6 million last year.

Silgan Holdings had $3.6 billion in sales for 2012. The company operates 81 manufacturing facilities in North and South America, Europe and Asia. It supplies metal containers metal, composite and plastic vacuum closures for food and beverage products, and plastic containers for food and personal care products.

Silgan was founded in 1987 and has a market capitalization of $3.1 billion. Shares rose 27 cents, or 0.55% to $48.92 Wednesday afternoon.

Written by Thomas Zadvydas.

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