Alcan Packaging's value

Sealed Air Corp.'s name keeps surfacing as a front runner to nab Alcan Inc.'s packaging business from Rio Tinto PLC, according to published reports in Britain, which have put a more than $5-billion (U.S.) potential price tag on the business, exceeding previous Citigroup estimates in a $3.8-billion to $4.6-billion range. Metals analyst John Hill figures 2007 EBITDA margins for Alcan Packaging to be 8.6 per cent, down about 350 basis points from 2002 levels. "Rising oil-based costs have compressed margins across the industry, but Alcan's are still well below its peer group" and return on assets has averaged just 4.2 per cent the past three years. Packaging analyst Tim Thein writes that at a price above $4.5-billion, the "integration (not to mention financing) risk associated with bringing together Alcan's diverse mix of businesses (from cheese wrappers to glass test tubes to cigarette boxes) would outweigh potential associated synergies for a U.S.-based flexible packager like Sealed Air." While Alcan Packaging has stressed a high volume/low cost strategy in Europe, its takeout would help improve the pricing landscape in the Western European flexible packaging market, which has suffered from sluggish demand growth in recent years, he contends. "This would especially help Bemis Co. Inc. ... as Europe accounts for about 10 per cent of flexible sales," he adds.