Irish group to pay $1.7bn for Gobain’s glass arm

Saint-Gobain has struck a deal to sell its North American glass container operation to Ireland’s Ardagh Group for $1.7bn, beginning its planned exit from the low-margin business.

While the French group looks to focus on higher-margin building materials operations, Ardagh’s worldwide glass business will increase by 60 per cent, chairman Paul Coulson said, with about 40 per cent of sales generated in the United States.

Plans by Saint-Gobain to spin off the whole of Verallia, which makes jars for Nutella spread and bottles for Dom Perignon champagne, had to be shelved in 2011 because of the deepening eurozone crisis.

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The deal announced yesterday, however, equates to 6.5 times Verallia North America’s 2012 earnings before interest, tax, depreciation and amortisation, which was $261m.

One Paris-based trader noted that the price tag represents about 30 per cent of Verallia’s total EBITDA. Implying the same multiples for the rest of the business, he said, would value the whole of Verallia at $4.3bn, way above estimates when Saint-Gobain was planning to offload 40 per cent through a share listing.

Saint-Gobain is now considering its options for the remainder of Verallia’s activities in Europe and Latin America, including an initial public share offering (IPO) or straight disposals.

The decision, however, will depend on market conditions, chief executive Pierre-Andre de Chalendar said. “The various options remain open, but we are not in a hurry. Financial markets in Europe today don’t allow these types of operations (at the moment),” he added.

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The sale proceeds will be used to strengthen the French group’s balance sheet and target small or medium-sized acquisitions, Mr Chalendar said.

Saint-Gobain, which was founded in 1665 to produce mirrors for the royal court of Versailles, has shifted to higher-margin innovative materials for which there is growing demand as the construction industry shifts its focus towards energy-efficient buildings.

The downturn in the auto industry has hit the group’s industrial glass operations, while demand for building materials in western Europe has been dampened by the economic slowdown.

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