Sealed Air Corporation (SEE) shares edged up 0.5% on the news that the specialty packaging service provider has agreed to sell its rigid medical packaging business to Milwaukee-based private equity firm Mason Wells for $125 million.
The transaction is expected to be completed in the fourth quarter of 2013. Sealed Air will however continue to make packaging products for the medical and pharmaceutical industry.
Sealed Air's rigid medical packaging business has been built up through the years from three previous acquisitions - Nelipak Holdings in 2006, Alga Plastics in 2007 and ATE Costa Rica in 2012. This included facilities in Ireland, the Netherlands, the United States and Costa Rica.
The rigid medical packaging business was part of Medical Applications group. The Medical Applications business provides solutions offering superior protection and reliability to the medical, pharmaceutical and medical device industries. Its core product lines include customer designed rigid and flexible packaging materials for medical and drug delivery devices, specialty component films for ostomy and colostomy bags and PVC free film to package pharmaceutical solutions. The business contributed 2% of Sealed Air’s revenues in 2012 and 2.7% so far in 2013.
In 2012, Sealed Air management divulged it plans to divest assets up to $500 million. The company had divested Diversey Japan, an indirect subsidiary of Diversey, Inc. to The Carlyle Group for gross proceeds of $323 million in Nov last year. In lines with this, the rigid medical packaging business is also being divested as it is no longer considered to be a strategic fit for the company.
Sealed Air reported third-quarter 2013 adjusted net earnings from continuing operations of 39 cents per share, up 39% from the year-ago earnings of 28 cents per share. Total revenue climbed 2% year over year to $1.93 billion, aided by volume increase of 1.4% and a favorable price/mix of 1.5%.
Sealed Air expects earnings per share to lie within $1.25 and $1.30 and sales of around $7.7 billion. This outlook included estimated net sales of approximately $100 million and approximately earnings per share of 4 cents related to the rigid medical packaging business. The company will account the results of this business as discontinued operations. Further details of the impact of this divestment will be divulged in Sealed Air’s fourth quarter earnings release on Feb 6, 2014.
Elmwood Park, N.J.-based Sealed Air is a major specialty packaging service provider to a diverse range of end markets. The company operates in the United States and in 50 other countries producing packaging and performance-based materials, and equipment systems serving food, medical, industrial and consumer applications.
Sealed Air retains a short-term Zacks Rank #3 (Hold). Other stocks with a favorable Zacks Rank in the industry are KapStone Paper and Packaging Corporation (KS) with a Zacks Rank #1 (Strong Buy), and Orchids Paper Products Company (TIS) and Rexam plc (REXMY) carrying a Zacks Rank #2 (Buy).