BRAZIL – Plastic films and aluminium extrusions manufacturer Tredegar has agreed to sell its flexible packaging films business, Terphane, to Oben Group affiliates for US$116 million.
With its headquarters in So Paulo, Brazil, Terphane is a producer of specialized polyester films. It solely comprises the flexible packaging segment of Tredegar.
The company has manufacturing facilities in Cabo de Santo Agostinho, Brazil, and Bloomfield, New York, and employs about 500 people and exports to 29 different nations.
Oben Group CEO Gonzalo Belaunde said: “We are excited about signing the agreement to acquire Terphane, a relevant producer of BOPET films in Brazil.
“Completion of this transaction will strengthen Oben’s position as a global player in the highly competitive flexible films industry, by expanding the production capacity of BOPET films and providing a great platform to expand production capacity for other films, especially BOPP, in the US and Brazil.”
Belaunde explained that the deal will allow both companies to combine operations and expertise to enhance service to their clients.
Meanwhile, Tredegar anticipates realizing after-tax cash proceeds following the completion of the deal of US$85 million after deducting anticipated withholding taxes from Brazil, escrow payments, US capital gains taxes, and transaction costs.
Due to potential changes in deductions over the possibly protracted interim period leading up to the closing date, actual after-tax revenues could deviate from forecasts, the plastic films and aluminium extrusions maker said.
Tredegar president and CEO John Steitz said: “We believe that the purchase by Oben of Terphane will enhance the scale and growth opportunities in the keenly competitive global flexible packaging market.”
The closing of the deal is subject to all customary requirements, including approval from Brazilian and Colombian competition authorities.
Oben works in the flexible packaging industry with experience in the production of advanced flexible films. The firm has locations in over 17 countries with sales to more than 40 countries including the Americas, Europe and Africa.
Q2 of FY23 results
The decision to sell Terphane comes after Tredegar recorded net income loss of US$18.9 million in the second quarter of 2023 (Q2FY23).
The company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) from ongoing operations for Aluminum Extrusions was US$10.2 million in the second quarter of 2023 versus US$21.9 million in the second quarter of last year.
EBITDA from ongoing operations during the last four quarters has been weak, in a range of US$8.9 to US$14.6 million.
Sales volume of 35.5 million pounds in the second quarter of 2023 was relatively consistent with the first quarter of 2023 and the fourth quarter of 2022 but declined significantly versus 49.0 million pounds in the second quarter of last year.
Open orders at the end of the second quarter of 2023 were 20 million pounds (versus 27 million pounds at the end of the first quarter of 2023), which is below the quarterly range of 21 to 27 million pounds in 2019 before pandemic-related disruptions that resulted in excessive open orders, which peaked in the first quarter of 2022 at approximately 100 million pounds.
While open orders have declined over the past year, Aluminum Extrusions has realized three sequential quarters of net booking growth.
John Steitz, Tredegar’s president and chief executive officer, at the time, said: “We recognized a loss for the quarter with each of our businesses suffering from depressed conditions in their markets, which we believe can mostly be traced to the residual impact of the pandemic.
“The timing of a recovery for them remains uncertain. Significant spending controls are in place. Debt, net of cash, declined by US$20 million during the quarter from much-needed improvement in working capital. Further, working capital improvement is anticipated by year-end.”
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