I love it when boring businesses get just a little bit more interesting. It's hard to get more boring than packaging, which is the business of Britain's Rexam (NASDAQ:REXMY).
Rexam already has a pretty good business as the largest producer of beverage cans in the world, and now the company is expanding its plastics operations by acquiring the plastics business of Owens-Illinois (NYSE:OI). Rexam will pay $1.83 billion for the business, which will immediately give Rexam a much larger presence in plastic packaging for medical supplies. Owens-Illinois will use the proceeds to pay down some of its large debt load and focus on its larger glass bottle business.
The immediate reaction to the sale has been negative for Rexam. I'm guessing that's largely because the company plans to issue equity as part of funding the purchase. I'm a bit more curious about the deal, because if Rexam can combine the acquisition with its other plastics packaging business and share technology and products, it could help it establish a strong position outside of its aluminum can business. Rexam has done a good job with acquisitions and has reliably generated cash flow over the past few years, which makes this acquisition and its potential all the more interesting.
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Nathan Parmelee had no financial interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.
