Berry Plastics Pulls Trigger on $765M Acquisition

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(Image Courtesy of Berry Plastics Group Inc.) (Image Courtesy of Berry Plastics Group Inc.)

Evansville-based Berry Plastics Group Inc. (NYSE: BERY) has announced the $765 million acquisition of a New Jersey competitor. Officials expect the deal for AEP Industries Inc. (Nasdaq: AEPI) to eventually lead to $50 million or more a year in cost synergies. AEP has some 2,600 employees throughout the U.S. and Canada.

During a conference call with investors Thursday morning, Berry Plastics Chief Executive Officer Jon Rich said the addition could open the door for some larger, longer-term contracts.

Answering a question about the possibility of the acquisition helping Berry move closer to striking a big deal with a resin producer, Rich said "as we discussed today, we think that's one of the many attractive features that got us excited about this combination. We do see that for a lot of good reasons, there's capacity being added in North America. And as I have said many times, one of Berry's key strategic advantages is its scale and totality, which helps us both in sourcing and conversion costs, so we think the timing of this is appropriate."

As part of the acquisition, Berry Plastics will take on AEP's debts. Berry anticipates its total, combined debt to exceed $6 billion once the deal is complete.

AEP is one of the top flexible plastic packaging film manufacturers in the U.S. and Canada, operating 14 manufacturing facilities. Its clients are in consumer, industrial and agricultural industries. Over the last year, AEP tallied $1.1 billion in sales and a net income of $39 million.

"We respect and admire the impressive company Brendan Barba has built over the last 40 years and look forward to welcoming AEP employees into Berry’s organization," Rich stated. "AEP, together with Berry’s Engineered Materials Division, creates an impressive packaging film producer serving the North American market. This unique combination offers the opportunity for significant value creation for Berry and AEP shareholders alike, as we realize procurement and operating cost savings across the two organizations."

Last October, Berry Plastics closed on the $2.4 billion acquisition of specialty materials producer, Aventiv. During Thursday's investor call, Rich called that deal "strategic and transformational." He added "it got us much more diversified into health, hygiene and medical markets and provided a terrific international platform for Berry to grow. I view the acquisition of AEP as very synergistic and complimentary to our EMD division (Engineered Materials Division) and while it has a large scale, I would describe it more as a classic 'bolt-on' acquisition to our EMD division."

The AEP deal is expected to close either late this year or early next year and Berry officials do not anticipate regulatory issues will get in the way.

During a conference call with investors Thursday morning, Berry Plastics Chief Executive Officer Jon Rich said the addition could open the door for some larger, longer-term contracts.
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