Amcor has staked the future of his company on the consolidation of the European flexible packaging industry, which has been plagued for many years with appalling margins as a result of massive overcap…
Amcor has staked the future of his company on the consolidation of the European flexible packaging industry, which has been plagued for many years with appalling margins as a result of massive overcapacity. Having consummated the three-way merger of the European operation with those of Danisco and Akerlund & Rausing, Amcor became the largest flexible packaging company in the region yet still has a market share of only 13%. There are more than 3,000 flexible packaging producers in Europe, and the five largest producers control an estimated 35% of the industry. In contrast, the figure in the US is a more profitable 50%. Europe needs to approach this level, and Amcor believes it is the company to lead the charge. The chances of Amcor doing so improved with the news that the flexible packaging unit of VAW Aluminium, recently acquired by Norsk Hydro, is for sale. Acquiring the VAW flexibles business would boost European revenues and give Amcor an 18 to 19% share of the market, more customer power and therefore influence over pricing. Analysts estimate the VAW unit, which has sales of EUR 550million would sell for up to US$ 450million. After the sale of its share of the Kimberly Clark Australia JV, Amcor has an estimated US$ 1.2 billion in acquisition capacity. However, a bolt-on purchase of the VAW business is not without flaws, as a substantial portion of its operations are in aluminium foil and other products (such as peel-off lids for yoghurt) rather than Amcor“s primary focus of plastic-based flexibles. The outcome will depend on Canadian giant Alcan which, depending on whom one listens to, is either a buyer or seller of its European assets. ABN Amro notes that Alcan has been proposed as a “highly likely“ seller of its European flexibles business, Lawson Mardon, which has an 8.7% market share and sales of EUR 730 million. This would give Amcor enormous synergies, but it may be too much on its plate. Many still want to see proof that last year“s three-way merger is on track.