Owens-Illinois Inc.'s planned $1.5 billion acquisition of French glassmaker BSN Glasspack SA was approved yesterday by the European Commission, eliminating the last major hurdle in the deal that will give the Toledo glassmaker a greater foothold in Europe as well as pile heavily onto the company's massive debt.
O-I is paying $625 million in cash for BSN, which makes glass containers for beverages and food and has production facilities in France, Germany, the Netherlands, and Spain. But the Toledo firm agreed to take on $835 million of Paris-based BSN's debt as part of the deal, giving it an overall value of $1.46 billion at the time.
The company said the deal is expected to be finalized within two weeks. The European Commission was expected to decide on the transaction last month, but was delayed because of competitive concerns. O-I and BSN were direct competitors in two highly concentrated regional markets - northeastern Spain and southwestern France, and southeastern France and northern Italy. The commission feared the acquisition would lead to domination of those regions by the Toledo firm.
In exchange for commission approval, the Fortune 500 Toledo firm agreed to sell two glass bottle plants, one in Spain, the other in Italy.
The deal, announced Feb. 19, will improve O-I's global standing, the company said. It will make O-I Europe's largest manufacturer of glass beer, wine, and liquor bottles. BSN, which is owned by United Kingdom buyout firm CVC Capital Partners Ltd., employs 6,400 people in 19 plants and has annual sales of about $1.6 billion. It does not make plastics.
O-I, Toledo's second largest corporation with $6.2 billioin in revenue, has $5.4 billion in debt, and the BSN acquisition will boost that figure past $7 billion. Rating agencies lowered O-I's credit after the deal was announced, although the firm has had junk-bond status for years.
The Toledo company has said it hopes to receive as much as $1 billion from the pending sale of its blow-molded plastic-bottle operations, money that would be used to reduce its debt.
Stewart Scharf, an analyst with Standard & Poor's, has placed a "hold" rating on O-I's stock but is not overly concerned about the BSN deal, and even called it a "good fit" for the northwest Ohio firm. "Their cash flow is improving and I think they have enough to handle this acquisition," he said. "It could, in the long run, benefit their European operations."
The company's stock rose 60 cents yesterday to $16.05 a share on the New York Stock Exchange, in seven times usual trading volume.
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