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Sonoco to Double Thermoforming Business with Latest Buyout

Zacks

Sonoco Products Company SON has inked an all-cash deal worth $230 million to acquire thermoformer Peninsula Packaging Company. This deal will nearly double Sonoco’s thermoforming business and comes at an opportune time when the perimeter of grocery stores, where fresh food is typically displayed is gaining consumer popularity. The transaction, subject to regulatory approvals, is expected to close by the second quarter of 2017.

Founded in 2001, Exeter, CA-based Peninsula Packaging is owned by a fund managed by Odyssey Investment Partners, LLC. It is a leading manufacturer of thermoformed packaging for fresh fruit and vegetables and operates five manufacturing facilities, four in the United States and one in Mexico. The markets it serves are produce, bakery, food processor, confectionary, convenience and deli. It is the largest single user of recycled washed bottle flake in North America which it converts into food-contact quality products for customer re-use. Moreover, the company operates one of the largest private solar panel farms in North America next to its Exeter location, producing up to 1 megawatt of power each day.

Sonoco Products Company Price

Sonoco Products Company Price | Sonoco Products Company Quote

This acquisition is in sync with Sonoco’s ‘Grow and Optimize’ strategy, which is focused on targeted growth of its Consumer Packaging and Protective Solutions businesses, and optimizing its Industrial-focused businesses. Sonoco will now enjoy a strong packaging position serving the perimeter in fresh food products along with its existing offerings in the center of the store, including those serving a range of frozen and shelf-stable foods.

It has been observed that over the past several years, supermarkets have spent $15 billion growing their freshly prepared options in order to boost sales of items along the perimeter of the store. Perimeter store sales of fresh foods are anticipated to achieve a compound average growth rate (CAGR) of between 6% and 7% in the next four years.



In the past one year, Sonoco has underperformed the Zacks categorized Containers–Paper/Plastic sub industry. Sonoco has gained 31% over the said time period while the Zacks industry has witnessed an increase of 34.2%. In the past few years organic growth has been weaker than expected as many of its served markets have struggled to grow.

Sonoco currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same sector include Kennametal Inc. KMT, Apogee Enterprises, Inc. APOG and Lawson Products, Inc. LAWS.

Kennametal has delivered an average positive earnings surprise of 9.90% in the last four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apogee also boasts a Zacks Rank #1 and has delivered an average positive earnings surprise of 13.24% in the trailing four quarters. Lawson Products, another Zacks Rank #1 stock, has an average positive earnings surprise of 23.77% for the past four quarters.

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