EUR 850.00 For Business Accounts Only

Morningstar | Bemis' Acquisition by Amcor Will Prove Beneficial for Bemis Shareholders

Bemis specializes in the production of flexible resin products used in consumer goods packaging. Around 70% of sales take place in the United States, with the remainder concentrated in Latin America, Europe, and Southeast Asia. Bemis’ international mix should grow larger thanks to both its recent acquisitions of Steripack and Emplal and higher sustainable volume growth rates in emerging markets. After an extended period of underinvestment, a 2014 change in management focused on putting the business back on track. A divestiture of its low-margin pressure-sensitive label business and a renewed focus on high-barrier flexible packaging have improved operating margins. Bemis’ profitability primarily revolves around the specialized production of meat, cheese, and dairy films. While consumption growth within these categories is likely to remain slow in developed economies, a steeper growth runway remains as emerging-market diets include a growing portion of these items. Although Bemis has consistently focused on keeping its high-profit meat and cheese operations running smoothly, some of its commoditized business lines had become uncompetitive. Reinvesting in these assets should improve throughput and reduce operating costs for domestic operations. As a result, we think this could open the door to sales Bemis had previously turned away and boost profit margins thanks to more efficient equipment.Following the announcement of Amcor's offer for Bemis, the company stands to gain scale in its international markets. Similarly, Amcor will benefit from more efficient North American operations, due to overlap with Bemis' much larger regional presence. Due to both the deal premium paid to Bemis and the likelihood of meaningful synergies between the two businesses, prospects look good for Bemis shareholders. The deal remains on track to close during the first quarter of 2019.