Silgan Buys Easytech for $36.5M; Shares Jump

Silgan Holdings Inc. (SLGN), the provider of sustainable rigid packaging solutions for consumer goods products, has acquired Easytech Closures S.p.A. for €31.5 million ($36.5 million). Following the news, shares of the company jumped over 2% by the close on Monday.

Easytech, operating a manufacturing facility in Fisciano, Italy, manufactures easy-open and sanitary metal ends used with metal containers mainly for food applications in Europe. For 2021, it is expected to generate sales worth €38 million ($45 million) and about €6.6 million ($7.8 million) in adjusted EBITDA.

Silgan has used revolving loan borrowings under its senior secured credit facility to fund the acquisition. The deal is likely to record annual synergies of about €4.1 million ($4.9 million) within 12 months, mainly through procurement savings and increased capacity utilization, the company said.

Additionally, the deal is anticipated to be slightly accretive to the company’s earnings in 2021, excluding purchase accounting adjustments, along with additional accretion likely to be in 2022.

Following the announcement of the deal, Silgan CEO Adam Greenlee said, “This acquisition will allow our combined businesses to more effectively and efficiently utilize existing capacity for metal ends, reduce capital investment in the near term and accelerate completion of an on-going cost reduction program. Our acquisition of Easytech is yet another example of our strategy to build shareholder value through a disciplined capital allocation model.” (See Silgan stock charts on TipRanks)

Continuing with its acquisition spree, recently, Silgan completed the acquisitions of Unicep Packaging, a Specialty Contract Manufacturer and Developer (SCMD) solutions provider, and Gateway Plastics, a manufacturer of dispensing closures and integrated dispensing packaging solutions.

Recently, J.P. Morgan analyst Jeffrey Zekauskas downgraded the stock from Hold to Sell but maintained the price target of $40 (4% upside potential).

Last month, BMO Capital analyst Mark Wilde reiterated a Buy rating on SLGN and increased the price target to $52 from $50 (35.2% upside potential) after the company’s revelation of the Gateway Plastics acquisition.

In a note to investors, Wilde said that the deal was likely to expand Silgan’s closures and dispensers business. He added that the Dispensing & Specialty Closures segment was expected to contribute 48% of EBITDA in 2022.

The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 4 Buys, 2 Holds and 1 Sell. The average Silgan price target of $46.29 implies 20.4% upside potential. Shares have increased 5% so far this year.

Investors should always be aware of the risks involved in any stock. According to the new TipRanks’ Risk Factors tool, SLGN’s main risk categories are Finance and Corporate and Production, which contribute 46% and 19%, respectively, to the total 26 risks identified for the stock. Within the Finance and Corporate risk category, Silgan has 12 risks, details of which can be found on the TipRanks website.

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