Cincinnati-based label technology company Multi-Color (LABL 76.25, -6.30) trades about 7.6% lower this afternoon as the company’s takeover of Constantia Flexibles from Constantia Flexibles GmbH fails to impress investors.
Garnering a substantial presence in Europe and Asia, Constantia reported net sales of about $690 million (EUR605 million) for the financial year ending December 2016.
The takeover price stands at about $1.3 billion (EUR1.15 billion), payable in cash and stock and is expected to close in Q3 of 2018. The combination brings together Constantia Labels' Food and Beverage business with LABL’s Wine and Spirit, and Home and Personal Care platforms, and emerging global position in Healthcare. Additional growth opportunities for LABL exist in Home and Personal Care by utilizing Constantia Labels' European operational footprint and assets. Growth opportunities for Constantia Labels exist in Food & Beverage and derive from LABL’s US operational footprint and assets. The stronger combined footprint in Asia will provide further revenue opportunities.
LABL’s stock will be issued to Constantia Flexibles at a price of $75 per share. Two representatives of Constantia Flexibles will join LABL’s Board of Directors, and the shares issued as consideration will be subject to customary lock-up provisions.
Cost synergies are anticipated to reach $15 million (or 2% of acquired revenues) by Fiscal Year March 2020 through a combination of procurement, SG&A, and manufacturing efficiencies.
Per the deal, Mike Henry, current EVP and Head of Constantia Labels, will become CEO-elect of LABL. Following the deal Constantia Flexibles will become a 16.6% shareholder in LABL.
Additionally, management reaffirmed its Core EPS guidance for Fiscal Year 2018 of $4.00. For the Fiscal Quarter ended June 30, 2017, management forecasts about $0.80 Core EPS as a result of one off production inefficiencies in one large plant primarily caused by timing of onboarding new and redesigned work before additional capacity and capability could be installed.