Chesapeake to sell display, corrugated businesses; will be 'pure play' specialty packaging firm
Chesapeake Corp. (Richmond, VA), in an effort to further implement its strategic repositioning as a focused specialty packaging business targeting premium branded consumer and pharmaceutical markets, will sell its temporary and permanent display and corrugated containers businesses. The announcement, made Friday, follows closely upon the company's previously announced decision to explore strategic alternatives for its U.S. display business to help create a stronger and more focused platform for future growth.
"The moves we are making accelerate our repositioning as a ‘pure play' specialty packaging company and give greater visibility to the company's inherent value," said Thomas H. Johnson, chairman, president and CEO. "This is the logical next step in our plan to concentrate our efforts on the growing and more profitable areas of specialty packaging in our targeted markets."
Johnson added that the sale of these businesses will streamline the company and that, near term, the divestiture proceeds will allow Chesapeake to reduce debt and increase profitability. Longer term, the divestitures give Chesapeake the flexibility to pursue further growth in premium branded consumer and pharmaceutical packaging markets, including a focused specialty packaging platform in North America to complement the company's strong position in Europe, said Johnson.
The divestitures will also enable the company to substantially reduce its overhead costs, and the company should begin to recognize savings in the second half of 2001, according to Johnson.
The businesses to be sold are the principal businesses of Chesapeake's Merchandising and Specialty Packaging segment:
• Chesapeake Display and Packaging, which specializes in the design, manufacturing, assembly, and packing of temporary point-of-purchase displays.
• Consumer Promotions International, which specializes in the design, manufacturing and assembly of permanent point-of-purchase displays.
• Chesapeake Packaging, which designs and manufactures corrugated shipping containers and other specialty corrugated packaging products.
• Chesapeake's interest in Color-Box LLC, which is a joint venture with Georgia-Pacific Corp. The joint venture designs and manufactures litho-laminated corrugated graphic packaging.
The discontinued businesses accounted for approximately 38% of the company's 1999 revenues, but only 15% of the company's 1999 operating income. For the first nine months of 2000, the discontinued businesses accounted for approximately 40% of the company's revenues, but generated an operating loss of approximately $13 million.
After the planned divestitures are completed, Chesapeake expects to have annual revenue of between $820 million to $870 million as a focused specialty packaging company with strong positions in both paperboard and plastic packaging.
Edited by Bill Noone
Managing Editor, PackagingNetwork.com