Owens-Illinois, Inc., said Monday that it has acquired a 49.7 percent stake in a Panamanian glass packaging manufacturer that will give O-I access to the Central American and Caribbean markets.
Empresas Comegua S.A., of Panama City, is the leading manufacturer of bottles and other glass packaging in those two markets and already serves many of O-I’s strategic global customers plus various segments, including food, soft drinks, beer, spirits, and pharmaceuticals.
The 49.7 percent interest was purchased from Fabricacion de Maquinas S.A. de C.V., a wholly owned subsidiary of Vitro, S.A.B. de C.V., which is the largest glass packaging manufacturer in Mexico.
The remaining ownership equity is held by Florida Ice and Farm Company S.A., which is a Costa Rican company, and Corporación Castillo Hermanos S.A., a Guatemalan company.
Comegua, which had annual revenue in excess of $200 million over the last 12 months, has offices in Panama but its main assets, two glass plants, are in Costa Rica and Guatemala. It also has two sand extraction operations and a total of 1,500 employees.
The purchase price was $119 million, according to Owens-Illinois, which is based in Perrysburg and is a leading global producer of glass bottles and other glass packaging. The transaction already has closed.
The Perrysburg glass maker currently supplies a few countries in the Caribbean with glass products made at plants in South America.
But O-I said it does not have any glass-making plants in either Central America or the Caribbean. Its closest plants are in Colombia.
Eight years ago, the company had a pair of plants in Venezuela that could have supplied the Caribbean market. But in 2010, under then-President Hugo Chavez, Venezuela moved to seize the two plants just a month after O-I paid $603 million to buy that country’s third-largest glassmaker.
In 2015, the World Bank’s International Centre for Settlement of Investment Disputes ruled that O-I should get compensation of more than $485 million for nationalizing the plants and said the firm could pursue the award. However, in 2017 O-I acknowledged that collecting would “present significant practical challenges.”
The Comegua acquisition puts O-I back on track to grab market share in the Caribbean and Central America.
“The Comegua transaction builds off the acquisition of O-I Mexico in 2015 and complements our existing footprint across the Americas which now extends from Canada to Argentina,” O-I Chief Executive Officer Andres Lopez said in a statement. “With this move, O-I is expanding into new and growing glass markets in Central America and extending its market presence in the Caribbean.”
Vitro CEO Adrian Sada Cuerva, said the Mexican glass maker was parting with Comegua in an effort to “align its business portfolio with a greater focus on resources for its key strategic businesses.”
Equity analysts seemed somewhat ambivalent to the Comegua acquisition.
Charles Gross, of Morningstar Inc., said it amounted to “a pretty small deal.”
Chip Dillon, of Vertical Research Partners, characterized the purchase of the 49.7 percent stake as a “bolt-on acquisition” — a Wall Street term for an acquisition that fits naturally within the buyer’s existing business lines or strategy.
“While this $119 million deal in isolation may be characterized as adding to earnings and cash flow, it is not clear if it is incrementally more accretive to per-share earnings and free cash flow compared to simply buying back $119 million worth of shares,” Mr. Dillon wrote.
“At around $17 per share, the company could have instead increased each remaining owners’ share of [O-I] by nearly 4.5 percent through a buyback. With the company guiding to around $2.75 in 2018 [earnings per share], such a share buyback would add up to $0.12 per share,” he wrote. “It is not clear that the 49.7 percent Empresas Comegua stake will add as much value for O-I’s owners.”
On Wall Street Monday, Owens Illinois’ shares fell 39 cents to close at $16.21 per share on the New York Stock Exchange.
Contact Blade Business Writer Jon Chavez at jchavez@theblade.com or 419-724-6128.
First Published November 12, 2018, 2:08 p.m.
