Mon 08/19/2019 15:45 PM
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Takeaways
 
  • The manufacturer of glass container products declined to discuss a potential buyout with the private equity firm as it believed the approach was opportunistic, one source said.
  • The sponsor circled Owens-Illinois around six months ago, another source said. At that time, the company’s shares were hovering between $18 and $20.

Owens-Illinois rebuffed an approach from The Blackstone Group earlier this year when its shares were almost double their current value, according to two sources familiar with the situation.

The manufacturer of glass container products declined to discuss a potential buyout with the private equity firm as it believed the approach was opportunistic, said the first source.

The sponsor circled Owens-Illinois around six months ago, the second source said. At that time, the company’s shares were hovering between $18 and $20, a far cry from their current value just below $11. The share price cratered following the release of Q2 earnings on July 31, when profits came in below the company’s guidance and the full year outlook was downgraded.

Owens-Illinois CEO Andres Alberto Lopez acknowledged the disappointing performance after the quarterly results, which he attributed primarily to lower sales volume and extreme weather conditions in Europe. At the same time, Lopez said the company’s strategy to focus on its core business and accelerated cost reduction is expected to bare fruit despite the recent hiccups.

The company said it is reviewing its business portfolio with the assistance of Goldman Sachs.

Owens-Illinois, with a market cap of approximately $1.7 billion, has operations in the Americas, Europe and Asia-Pacific. It produces glass containers primarily for the food and beverage industries.

Blackstone has experience in the space. It owned Graham Packaging for over ten years and used it to make several acquisitions, including buying the Plastic Container unit of Owens-Illinois for $1.2 billion in 2004. The private equity exited the investment in 2011 when it sold Graham Packaging to Reynolds Group for $4.5 billion, including debt.

The view that packaging will continue to shift away from plastic into materials like glass that have a lower environmental impact, played a role in attracting Blackstone toward Owens-Illinois, said the first source.

The sponsor was also prepared to address hurdles such as pension liabilities, this source said. Owens-Illinois closed 2018 with almost $2.5 billion in pension obligations between its U.S. and non-U.S. operations. It incurred pension settlement charges of $74 million, $218 million and $98 million in 2018, 2017 and 2016, respectively.

Owens-Illinois did not respond to a request for comment. Blackstone declined to comment.

--David Carnevali
 
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