Amcor (AMC) shares hardly moved yesterday in reaction to its second small packaging buy in a fortnight, but in yesterday’s sell down the rise of one a half cents was a solid performance.
Amcor shares eased 0.3% to end at $14.25.
Both purchases are not material so far as Amcor’s wider businesses are concerned, but they do represent a filling out of its portfolio of packing operations.
Amcor has made 16 acquisitions over the past four years in rigid plastics and flexible packaging, and analysts say though small, each has delivered returns at or above its company’s benchmark investment hurdle of a 20% return.
The most recent, announcement yesterday involves Amcor buying a Brazil-based tobacco packaging company called Souza Cruz for $US30 million ($39.1 million).
Souza Cruz is majority-owned by British American Tobacco plc, and Amcor said yesterday the company is the market leader in the Brazilian cigarette market which represents 35% of Latin American cigarette consumption and is the 12th largest tobacco market in the world.
The business was expected to achieve annual sales of approximately $US63 million.
AMC 1Y – Amcor keeps the acquisitions rolling
The Sousa Cruz deal came just two weeks after Amcor agreed to pay $US22 million for Nampak Flexibles, the market leader in flexible packaging in South Africa, with annual sales of $US94 million.
According to analysts, Amcor sees a $US2 billion pipeline of potential deals, mainly in emerging markets in Africa, Latin America and Asia, which are growing at more than twice the pace of developed markets such as North America and Europe.
Retiring Amcor chief executive Ken MacKenzie seems to be tidying up loose ends before he steps down at the end of July.
Mr MacKenzie said the Sousa Cruz acquisition, which is conditional on approval from the Brazilian Anti-trust Authority, was aligned with Amcor’s strategic objective of growing its packaging operations in Latin America.
"It represents an excellent opportunity to support an important global customer by extending access to Amcor’s global innovation platforms and strong operational capabilities," he said.
