- September 15, 2003, PRESS RELEASE
HARTSVILLE, SC, USA—Global packaging company Sonoco reports it has entered into a definitive agreement to sell its high density film business to Hilex Poly Co. LLC for approximately USD 123 million. According to Sonoco, its high density film business produces plastic grocery, retail, produce, and quick-service bags and agricultural film in five plants in the US. Hilex is a member of the Los Angeles, CA-based HPC Group of Companies as well as DCH I Investment Holdings, an affiliate of Dewberry Cesinger Hodgson of Atlanta, GA, and Los Angeles, CA (the private equity firm affiliate of Atlanta-based Dewberry Capital Corp.).
Sonoco says total proceeds from the sale are expected to include USD 85 million in cash, plus suborinated notes and preferred non-voting membership interests, and will result in a net gain. Sale completion is expected in Q4 2003, subject to regulatory approval. Through the first six months of 2003, adds the packaging manufacturer, its high density film operations had sales of about USD 89.5 million and pretax profit of approximately USD 4.4 million.
Says Sonoco president and CEO Harris DeLoach, "[We're] the leading producer of plastic grocery bags in the United States, having led the conversion of grocery bags from paper to, principally, plastic. While the business has met or exceeded our cost of capital consistently, it is not one of our core businesses. We believe the ability to redirect the value of these assets to our primary growth vehicles will enhance our opportunity to increase total returns to shareholders and significantly reduce the company's exposure to highly cyclical resin markets."
Sonoco's high density film operations include approximately 800 personnel, of which about 200 are located at its headquarters and plant in Hartsville, SC. It adds it four additional plants (to be included in the sale) include operations in Milesburg, PA; Mount Olive, NC; North Vernon, IN; and Victoria, TX.
Sonoco also to Shut Down Fulton Flex Pack Plant
The company also recently announced (mid-August 2003) it will close its flexible packaging plant in Fulton, NY, and the closing will be phased over the remainder of the year and completed by the end of the first quarter 2004. According to the company, the Fulton-based operations will be consolidated into its flexible packaging plants in Edinburgh, IN, and in Morristown, TN, USA. Sonoco adds the consolidation is part of its previously announced plans to reduce its average cost structure by more than USD 60 million and "is expected to result in significant savings."
Approximately 130 employees at the Fulton, NY, operation will be offered outplacement assistance and, in some cases, says the packaging company, will be offered transfer to other Sonoco locations. The plant was acquired in 1993 and produces flex pack for confectionery, snacks, and home and personal-care products.
Explains Sonoco flex pack div. VP Thomas Coker, "It is always difficult to close a facility, particularly when you have people as dedicated as our team at the Fulton facility. Unfortunately, this action is necessary to reduce Sonoco's overall cost structure in light of general economic conditions and rising costs associated with raw materials, energy, medical, and pensions and post-retirement expenses. These consolidations will in no way adversely affect our ability to serve our markets and customers."
Visit Sonoco at sonoco.com.