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Sonoco Products Company SON announced that it has inked a deal with TOPPAN Holdings Inc. to sell its Thermoformed and Flexibles Packaging (“TFP”) business. This move will accelerate Sonoco’s portfolio optimization strategy and help it focus on core industrial paper and consumer packaging businesses.
The transaction is expected to close in the first half of 2025. Toppan will pay around $1.8 billion on a cash-free and debt-free basis. Sonoco will use the net proceeds from the deal to repay existing debt.
Details on Sonoco’s TFP Business
On Sept. 4, 2024, Sonoco announced that it commenced a strategic review of its TFP business, which used to be a part of Sonoco’s Consumer Packaging segment.
The segment’s products consist of rigid packaging (paper, metal and plastic) and flexible packaging. It caters to the consumer staples market focused on food, beverage, household and personal products. This segment accounted for approximately 53% of sales in 2023.
TFP provides complex packaging solutions to various categories including snacks, condiments, healthcare, prepared meals, fresh products, coffee and pets. The business generated revenues of $1.3 billion in 2023, contributing 36% to the Consumer Packaging segment’s revenues and 19% to Sonoco’s total revenues.
SON’s Ongoing Portfolio Strategy to Improve Profitability
To improve the company’s long-term profitability and return capital to its shareholders, Sonoco has been simplifying its business portfolio and focusing on larger and core business units. SON continues to work on commercial, operational and supply-chain excellence programs, intended to shift the mix of its business toward higher-valued products and increase productivity. Its strategic pricing initiatives will also aid results.
On Dec. 4, 2024, the company announced that SON completed its previously declared acquisition of Eviosys from KPS Capital Partners for approximately $3.9 billion. Following the integration process, Eviosys will become a part of SON’s Consumer Packaging segment.
The addition of Eviosys’ highly complementary portfolio will help Sonoco expand its customer base and open up organic growth opportunities in consumer-oriented end markets. This will also boost Sonoco’s innovation and sustainability efforts.
This buyout will strengthen SON’s core metal packaging business and global presence while enhancing sustainability efforts. The company has identified more than $100 million of synergies expected to be realized within two years of closing.
Sonoco Stock’s Price Performance
SON’s shares have lost 9.2% in the past year against the industry’s 18.1% growth.