RTPPF Rio Tinto Plc (PK)

Bemis Company Inc. (BMS) has acquired West Monroe, Louisiana-based Shield Pack, LLC, a manufacturer of high barrier liners for bulk container packaging. The financial details of the deal have not yet been disclosed.

Shield Pack generates annual net sales of around $25 million. This transaction will not affect Bemis’ 2011 EPS guidance. As a recap, Bemis had put forward an EPS guidance range of 36 cents to 42 cents for the fourth quarter of 2011 and between $1.90 and $1.96 for fiscal 2011.

This acquisition will expand Bemis’ reach into new market applications for bulk liquids and other products that necessitate barrier packaging. Shield Pack`s know-how in moisture and oxygen barrier technology fully complements Bemis’ existing capabilities and focus on high barrier packaging solutions. Bemis offers a multitude of proprietary film structures that extend shelf life by providing protective barriers to potentially harmful elements such as oxygen, light and moisture.

Bemis has successfully grown through acquisitions. Earlier, in August, Bemis acquired Mayor Packaging, a privately owned manufacturer of consumer and specialty flexible packaging including a manufacturing facility in Dongguan, China, for $96 million. During the third quarter, Bemis completed the purchase of the remaining shares owned by the non-controlling interest of its Brazilian subsidiary, Dixie Toga, S.A., for approximately $90 million.

Bemis’ last major acquisition was the $1.2 billion buyout of Food Americas, an operation of  RioTinto plc.’s (RTPPF) Alcan Packaging business unit, in March 2010. Food Americas’ flexible packaging facilities helped Bemis to expand its global presence in the United States, Canada, Mexico, Brazil, Argentina and New Zealand. Following the completion of the acquisition, Bemis’ revenues crossed the billion dollar mark.

Bemis has adopted a disciplined business model to ensure efficiency and effectiveness in the face of weak demand experienced in the last two years. This initiative was taken to reduce operational costs and encourage savings and investments in prospective opportunities, and to pay back debt if the situation permits. Moreover, the company spends heavily in research and developmental activities to live up to the expectation of its existing customers as well as to attract new potential customers.

However, rising raw materials prices have significantly impacted the company, putting downward pressure on its margins. Further, lower volumes remain a point of concern. The shares of Bemis currently retain a Zacks #5 Rank (short-term Strong Sell rating). We maintain our Underperform recommendation on the stock.

Neenah, Wisconsin-based Bemis Company is a major supplier of flexible packaging and pressure sensitive materials used by leading food, consumer products, healthcare, and other companies worldwide. Bemis competes with the likes of Sealed Air Corporation (SEE) and Avery Dennison Corporation (AVY).

 
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