PARIS -- Glass packaging leader Ardagh Group said on Monday that it had offered to buy North American glass packaging interests from French materials giant Compagnie de Saint-Gobain (IW 1000/79) for about $1.7 billion to climb into a new league in the global packaging business and raise its product range.
The deal will enable Saint-Gobain to reduce debt.
Ardagh Chairman Paul Coulson, credited with a driving a decade of ambitious growth, said in a statement that buying Verallia North America, which is based in Indiana, "would be another important milestone in the evolution of Ardagh as it would add scale, diversity and value to our global packaging operations."
Ardagh, developed from the Irish Glass Bottle Co. founded in Dublin in 1932 but now based in Luxembourg, is already a big international player in the packaging sector. It operates in 26 countries and employs 22,000 people.
The company said it had made "a binding and irrevocable offer and entered into exclusive negotiations" with Saint-Gobain for its Verallia North America (VNA) unit, with an offer of about $1.7 billion."
Eye on Wine Sector
Group CEO Niall Wall added that acquiring VNA "would allow us to expand our glass operations into the very important wine sector in the U.S. for the first time."
Last year the North American activities of Verallia generated sales of about $1.61 billion and an operating profit of $171 million.
Verallia has 13 U.S. Plants
The Verallia business says it is the second-biggest maker of glass bottles and jars in the United States, where it has 13 industrial sites and employs slightly more than 4,400 people.
Saint-Gobain, a global group with a strong presence in the manufacture of glass and building materials, will consult with its works council before making a decision, it said in a statement.
Saint-Gobain said that the offer was not conditional on arrangements for finance but was subject to approval from U.S. competition authorities.
Saint-Gobain CEO Pierre-Andre de Chalendar said the offer provided an excellent opportunity to take forward his group's strategy of focusing activities on the housing sector.
Money raised by the sale would be used mainly to strengthen the group's balance sheet. The company would continue with its targeted policy of buying small- and medium-sized businesses.
De Chalendar said that Verallia's other activities in western and eastern Europe, in Algeria and in strongly growing markets in Latin America gave the company global scale.
Coulson estimated that the new North American activities would generate about 40% of the company's total sales and earnings before interest, tax, depreciation and amortization.
The deal should be concluded during 2013.
Davy analyst Flor O'Donoghue noted that from a financial point of view: "The transaction will reinforce an already solid" position for Saint-Gobain by reducing its debt.
Copyright Agence France-Presse, 2013