Toledo's Owens-Illinois Inc. yesterday said it had a deal to sell a large chunk of its global business, which includes factories in Fremont and Findlay.
It is shedding operations that make plastic containers for food and household products, focusing instead on glass-bottle making. The business units were sold for $1.2 billion to Graham Packaging Co. LP of York, Pa., the majority of which is owned by New York buyout firm Blackstone Group.
O-I, Toledo's second largest corporation, plans to use the proceeds to reduce its debt, which analysts have described as high.
"I thought it was pretty well telegraphed by the management team, and it's good to see that it's actually done, allowing them to focus on what they are really good at, glass containers," said Ghansham Panjabi, an industry analyst with Lehman Brothers.
"It's a good strategic move and it makes a lot of sense."
The deal, subject to regulatory approvals, is expected to be finalized in the last three months of the year.
The operations in the deal had sales last year of $1.1 billion and employed more than
5,000 persons. O-I, a Fortune 500 firm, had sales last year of $6.2 billion and about 30,000 employees.
It was not immediately clear whether Graham would keep all the factories it purchased. The one in Findlay has 248 employees and makes containers for household products and personal-care items.
The 112-employee Fremont plant, which had a major fire this year, primarily makes food and beverage containers.
For the Toledo company, however, the deal will provide about $1 billion after taxes. "It was higher than we actually expected," said O-I spokesman Sara Theis.
O-I's heft will not be harmed by the divestiture, since the glassmaker last month finished the acquisition of BSN Glasspack SA for $1.4 billion and still will end up adding about $400 million in sales and 1,400 employees.
The French company had $1.5 billion in sales last year and 6,400 employees, and the acquisition will make O-I the largest glass-container maker on at least four continents.
Locally, though, O-I will be left with one factory, which is in Bowling Green, as well as its downtown Toledo headquarters and a research facility in Perrysburg Township. O-I has 1,700 employees in northwest Ohio.
Shedding the blow-molded plastic operations will allow O-I to concentrate energies on making glass containers, as well as some plastic items.
The company will continue to make plastic health-care items, such as prescription bottles and syringes, and plastic closures for syrup and other items.
The local firm announced in December it had an investment adviser to consider selling its blow-molded plastic container operations.
In recent weeks, Graham was identified in published reports as the apparent buyer. Neither firm would comment at the time, and the O-I spokesman yesterday declined to say how many final bidders there were.
The sale will help O-I reduce its debt, which is about $7 billion, a figure that concerns analysts. Rating agencies lowered the company's credit status after the BSN deal was announced, although the firm has had junk-bond ratings for years.
"We will now be able to deleverage ourselves in the short term and be better able to focus our resources on the core businesses, technologies, and channels that represent our long-term future," Steve McCracken, O-I's chairman and chief executive, said in a statement.
Mr. Panjabi, the analyst, said the price the Toledo firm received was "pretty reasonable," and he expected the company may yet shed some small operations but will not be looking to buy anything because of its debt.
The sale was not only good strategically for O-I, but smart because the plastic container business was not doing particularly well financially, with a lot of capacity in the market, he said.
The late announcement did not affect O-I's stock price, because trading had halted for the day. The stock closed at $14.56 a share on the New York Stock Exchange.
Sold were 24 factories in the United States, two in Mexico, three in Europe, and two in South America.
While Graham officials could not be reached late yesterday for comment, a statement the firm issued said it would evaluate the plants after the deal is completed.
"We have long admired Owens-Illinois," Philip R. Yates, Graham chairman and chief executive, said in a statement. "This move gives us industry-leading plants, processes and products, technical resources, design teams, and overall the best people in the industry."
The acquisition will make Graham a $2.2 billion company with more than 9,000 employees and 88 plants worldwide.
Contact Julie M. McKinnon at
or 419-724-6087.32.18524 -85.26158