US based Owens-Illinois Inc reported that it had acquired Brazilian firm, Companhia Industrial de Vidros. Companhia Industrial de Vidros manufactures glass and the US firm reiterated that its acquisition will greatly expand its foothold in South America’s biggest container market. Owens-Illinois is keen on considerably expanding its presence in South America and especially Brazil, currently the biggest container market in the region.

Companhia Industrial De Vidros is one of Brazil’s foremost glassmakers, and the leading firm in the northeastern part of the country. Owens-Illinois further reiterated that it will aim to benefit from the northeastern Brazil market, considered one of the fastest growing in the country. The deal will see the American firm acquire two of Companhia Industrial’s plants in the state of Pernambuco and an additional plant in the Ceara state.

As such, the US firm expects the acquisition to bolster its capacity in Brazil by around 50 per cent. Currently, Companhia Industrial’s plants employ around 1,300 individuals and produces glass containers for the beverage, food and pharmaceutical industries. Other than those, Companhia also produces tableware. Under the terms of the deal, the US firm will part with $603 million for the acquisition of Companhia’s glass container business.

The amount is inclusive of future tax benefits with an approximated value of $140 million. The tax benefits are inclusive of both federal and state incentives for development in Brazil's northeastern region. The consideration for the acquisition was an all cash deal. The US based firm expects the acquisition of Companhia to boost its net sales by about $200 million in the first full year of operation.

The return on investment is expected to exceed Owens-Illinois' cost of capital. The purchase price reflects a 5.8 times earnings before interest, tax, depreciation and amortization;  multiple for the first year of operation, excluding the present value of future tax benefits and including estimated net cost savings.

Owens-Illinois chairman and chief executive officer, Al Stroucken, said the acquisition of the well managed firm in South America directly bolsters the firm’s strategy targeted at expanding its foothold in emerging markets with strong earnings growth potential. Coupled with the fact that South America is Owens-Illinois’ fastest growing and most profitable region, the acquisition is a hit on time, said Stroucken.

The firm recently expanded its business in Argentina, China, Malaysia and Vietnam, and additionally set up new furnaces in New Zealand and Peru.

8 Sep 2010.