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Why Iridian sold a position in Crown Holdings

Smita Nair

Iridian Asset Management's 4Q 2013 positions (Part 6 of 7)

(Continued from Part 5)

Crown Holdings, Inc. (CCK) was a 1.73% position in 3Q 2013 that was eliminated last quarter. Crown is a leading manufacturer of packaging products for consumer marketing companies around the world. Crown makes a wide range of metal packaging for food, beverage, household and personal care, and industrial products, and metal vacuum closures and caps.

Crown saw a fall in share price after the company missed estimates in its 4Q results. Fourth quarter gross profit declined to $274 million from $281 million in 4Q 2012, as increased beverage can volumes and lower depreciation expense were offset by lower volumes and substantially reduced production activity across food can operations in North America and Europe. In 3Q 2013, the company said its food, aerosol, and specialty businesses performed well relative to the industry, however demand for food cans in Europe was below expectation principally due to end user cyclical demand weakness. As the European economies recover from recession, Crown expected the food can demand to rebound.

The stock jumped in October when the company acquired Mivisa Envases SAU of Spain in a €1.2 billion ($1.6 billion) deal. The acquisition is expected to build upon Crown’s existing position in the European food can segment by substantially increasing presence in Spain, one of Europe’s leading agricultural economies. With sales of €555 million and EBITDA of €133 million for the audited fiscal year ended June 30, 2013, Mivisa is the largest food can producer in both the Iberian Peninsula and Morocco.

The company said in its 4Q earnings release that for 2014, general business conditions in North America and Europe are expected to improve, positively affecting the company’s performance. Crown also anticipates further global beverage can growth and solid contributions from the 2013 capacity expansion in Cambodia,China, Malaysia, Thailand, and Vietnam, as well as the start-up of a new plant in Teresina, Brazil. This, combined with a continuing focus on cost reduction and productivity improvement throughout the Company, will deliver increased value to shareholders.

Analysts at Wells Fargo recently upgraded the stock and said “that several of the challenges which have plagued CCK’s operational performance over the past two years have either been reconciled or bottomed such that returns from several of the company’s recent capital projects can begin to translate into profit growth.” However, estimates were lowered due to “reduced earnings in the company’s North American Food can business, and no improvement in pricing for Chinese beverage cans.”

Continue to Part 7

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