Transcontinental's 'Transformational' $1.32B Deal Makes it a Major Packaging Player
In an era of continual consolidation across the global printing and packaging industries, the Monday, April 2, announcement of Transcontinental Inc.’s acquisition of Coveris Americas signaled the latest instance of major players making major moves. Transcontinental, known as Canada’s largest printer, positioned itself to become a packaging juggernaut, as Coveris Americas represents one of the top 10 flexible packaging converters in North America.
On Tuesday, April 3, Transcontinental hosted a press conference in Montreal, which was simultaneously broadcast online, during which Isabelle Marcoux, chair of the Transcontinental board of directors, hailed the acquisition as “transformational.”
Marcoux, speaking French, which was translated to English on the webcast, explained that Transcontinental has recognized the opportunities that have emerged in flexible packaging in recent years. She explained that the company operates three business segments - printing, media, and packaging. While all three pillars remain essential to Transcontinental’s business, Marcoux explained that the company intends to expand its growth in packaging. She also reiterated that Transcontinental is committed to maintaining a strong corporate office in Montreal, where it is currently situated.
“Coveris Americas is our seventh acquisition in soft [flexible] packaging since 2014,” Marcoux said. “It is clearly the one that is the most substantial and positions us among the top 10 [flexible] packaging businesses in North America. For the past four years, we have been building an extraordinary business North America-wide and we have an international presence. I am very proud of all of this. It’s a transformational acquisition that is in line with our vision and positions us nicely to continue to consolidate in the [flexible] packaging market.”
Following Marcoux, Francois Olivier, Transcontinental’s president and CEO, provided further details about the acquisition and its overall impact on the company. He explained that Coveris Americas operates 21 production plants around the world, with 14 located in the United States and accounted for $966 million in revenue in 2017. He said the 3,100 Coveris Americas employees would be joining Transcontinental.
Olivier, also through a translator, explained that with the acquisition, Transcontinental’s earnings would reach C$3.3 billion, with flexible packaging accounting for the most significant portion of that figure at 48% of sales (C$1.6 billion). Rounding out the portfolio, Olivier detailed that printing will make up 45% of the business, with media accounting for the remaining 7%.
Another key aspect of the acquisition that Olivier detailed was the investment that Coveris had put into its plants prior to the acquisition the tune of US$140 million.
“It’s a platform that has been invested in with new technologies and with excess capacity that we’ll be able to sell to the market,” Olivier said.
Regarding synergies between the two companies, Olivier explained the acquisition of Coveris Americas will strengthen Transcontinental’s position in dairy, animal feed and general consumer products. Additionally, he said the acquisition opens the door to new market segments, including agriculture, proteins, beverages, performance packaging and advanced packaging.
Another new capability that the acquisition will provide for Transcontinental is the ability to manufacture its own flexible film. Olivier explained that, previously, Transcontinental purchased film from outside vendors, but with Coveris’s manufacturing capabilities, it will provide cost advantages and new packaging development capabilities.
“This is a competitive advantage when it comes to cost,” Olivier said. “It also allows us to innovate further and to bring new products to market that our food customers are looking for so that their products stand out more on the retail shelves.”
Olivier reiterated the transformational aspect of this acquisition for Transcontinental, stating that the packaging segment of the business would now become its largest.
“It positions Transcontinental as a major player in North America and in the world when it comes to [flexible] packaging,” he said.