PalEx, IFCO Merger to Create New Pallet, Packaging Company
PalEx Inc. and International Food Container Organization (IFCO) announced Tuesday that they will merge their businesses to create a pallet and packaging provider with anticipated revenues of about $550 million in 1999. The combined entity, to be named IFCO Systems, will include IFCO's European, U.S., Asian and Latin American returnable packaging operations and PalEx's North American pallet and industrial container operations.
The merger will create a global provider of supply chain support services. The new company will own and manage the leading rental pool of returnable plastic containers (RPCs) in Europe and the second largest rental pool of pallets in North America. It will also be the largest provider of new pallets and pallet and container reconditioning services in North America. The combined enterprise intends to accelerate the rollout of existing early-stage IFCO RPC pools in the United States, Asia and Latin America. In addition, it plans to bundle other supply chain support services with the existing IFCO operations by designing and managing closed-loop logistics and materials handling systems for its customers.
Christoph Schoeller, a founder and managing director of IFCO, said, "Our supply chain support system is proven in Europe and is experiencing strong growth. PalEx provides the logistical infrastructure for expanding that system in North America. The new company intends to link its international operations into a global network providing environmentally friendly supply chain solutions."
Under the terms of the agreement, PalEx will merge into a new subsidiary of IFCO Systems. The outstanding shares of PalEx's common stock will be exchanged for common stock of IFCO Systems representing between 32% and 35% of its outstanding shares. The remaining shares of IFCO Systems will be owned by Schoeller Packaging Systems, and a subsidiary of the General Electric Co. will own a note convertible into shares of IFCO Systems. The merger will occur concurrently with an initial public offering of shares in IFCO Systems.
IFCO owns and manages the leading RPC pool in Europe. It also has RPC operations in the United States, Latin America and Japan. Started in 1992, the European pool now serves approximately 15,000 supermarket outlets in 15 countries in Europe. The pool consists of approximately 50 million collapsible, reusable plastic containers. IFCO leases the containers to produce growers, retrieves the empty containers from supermarket customers, washes and in some cases repairs the containers, and returns the cleaned containers to the growers. IFCO deploys the containers from a logistical system that includes 91 depots located throughout Europe.
Based in Houston, PalEx provides new and recycled pallets and reconditioned drums, operating 71 facilities in 23 states in the United States and seven provinces in Canada. It owns and operates the second largest pallet rental pool in North America and is engaged in rental of industrial containers. PalEx reported revenues of $320 million in 1998.
Christoph Schoeller will serve as chairman of IFCO Systems, which will have joint headquarters in Houston and Munich. Martin Schoeller, a founder and managing director of IFCO, will serve as CEO. Vance Maultsby, currently CEO of PalEx, will serve as IFCO Systems' executive VP, Strategy and Finance.
The closing of the merger is subject to the approval of shareholders, expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act, completion of the initial public offering of IFCO Systems, and other customary conditions. The transaction is expected to be completed in the second or third quarter of this year.