Sonoco To Sell Its Contract Packaging Operations For $120M

Sonoco To Sell Its Contract Packaging Operations For $120M

Sonoco Products has agreed to sell its Europe contract packaging business to Wisconsin-based Prairie Industries Holdings in a cash transaction worth $120 million. The deal is expected to close in the fourth quarter of 2020.

Sonoco (SON) expects to use the proceeds from the transaction to reduce short-term debt and boost its liquidity position. Further, the move also forms part of the diversified packaging company’s efforts to simplify its operating structure and focus more on growing its core Consumer and Industrial packaging businesses.

The Europe contract packaging business, which is a part of Sonoco’s Display and Packaging segment, provides custom packaging and supply chain management solutions services to global consumer product goods companies in more than 40 countries in Europe, the Middle East, Africa and Asia. The business generated net sales of approximately $300 million in 2019. (See SON stock analysis on TipRanks).



On Sept. 17, UBS analyst Joshua Spector initiated coverage on the stock with a Hold rating and a price target of $66 (22.7% upside potential). He expects balanced risk/reward at current levels and believes that 2021 volume recovery is already priced in the stock. The analyst expects Sonoco’s volumes to grow by about 2% in 2021 and margins to gain about 70 basis points over the next 3 years.

Like Spector, the Street is also sidelined on the stock. The Hold analyst consensus is based on 4 Holds, 1 Buy and 1 Sell. The average price target of $55.60 implies upside potential of about 3.4% to current levels. Shares are down by about 12.8% year-to-date.

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The post Sonoco To Sell Its Contract Packaging Operations For $120M appeared first on TipRanks Financial Blog.

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