Amcor plc has yet to close on the company's blockbuster acquisition of Berry Global Group Inc., but there already is talk about selling off portions of the combined plastics packaging company.
And Amcor CEO Peter Konieczny, who will keep that title with the combined company, said the company is "pretty much looking at everything."
Amcor's $8.43 billion all-stock purchase of Berry is on track to close this summer, still subject to shareholder approval later this month.
But Konieczny said during his company's latest earnings conference call with security analysts there already are eyes on what portions of the new company can be divested to allow for a greater focus on higher-margin business.
He pointed to Berry's recent divestiture of both its Health, Hygiene and Specialties global nonwovens and films business as well as its specialty tapes business as two examples of doing just that. HHS was merged with Glatfelter Corp. and spun off into its own company, Magnera Corp. And the tapes business was sold to Nautic Partners LLC.
Combining Amcor and Berry, each already two of the largest plastics packaging makers in the world, into one company creates a global powerhouse with a broad reach and range of products.
Konieczny said Zurich-based Amcor will examine the combined business following the merger to see what makes sense to potentially divest.
"This is one of the additional levers that we can pull in order to orient the business towards a stronger, faster-growing business organically and a business that is more attractive in terms of a higher and better margin quality," Konieczny said.
"Now with the combination with Berry, we have embarked on a work stream that essentially puts the whole portfolio on the table, and we have started the conversations around that," he said.
"So we're on it, and we're pretty much looking at everything. And as I said before, there are multiple criteria that we would apply to this analysis. But two of them are stronger intrinsic organic growth and then margin quality," the CEO said.
"It's a little too early for us to say where we land and what we are going to do. I think we need a little more time in order to come to a conclusion on it," he told the stock analysts.
"It's really just about organic growth and making business more attractive in terms of margin quality," he said.
Konieczny, later in the conference call, said Amcor cannot do much officially right now as the companies continue to work toward completing the merger.
"What we're currently doing is we're essentially organizing ourselves. It's still business as usual. We're still two different businesses. So we can't address the integration. We can't start doing that. We can just plan it," he said.
"We're setting ourselves up with an integration management office. Underneath that we're organizing ourselves with teams that will address the different work streams that will bring the two cultures together but then are also focused on generating the synergies so that we're able to deliver and outperform against that as the two companies come together."
Amcor and Berry have previously said they expect to create $650 million annually in so-called synergies – or cost savings -- by combining. Half of that number, $325 million, includes better prices on procurement. Other savings will come from lowering selling, general and administrative costs of the combined firm and then from manufacturing operations. SGA is a category that includes costs not associated with the manufacture of products.
The two companies, right now, spend about $13 billion each year, including about $10 billion on raw materials, a category that includes resin. A $325 million savings would represent about 3 percent of the raw material costs, a potential savings "which we think is well aligned," the CEO said.
Amcor makes both rigid and flexible packaging, while Berry's portfolio has become more focused on rigid packaging with the recent divestitures.
Konieczny provided some insight into how the company views the rigids business as the two firms come together.
Amcor's rigid packaging division does about $3 billion in business, and Berry has a containers and closures business with about $7 billion in sales, the CEO said.
"Hence, the combination will get us to a really scaled player and multi-regions. That's different from what we have today," he said.
Konieczny explained that much of Amcor's rigid business is in the North American beverage sector with another portion in the specialty containers segment. Specialty containers, he said, is a large business for Amcor, but not as big as the North American beverage business.
Evansville, Ind.-based Berry, meanwhile, is deep into the containers business and does not make products for beverages in North America, the Amcor CEO explained.
"We believe that is very positive for us because we were very interested in the specialty containers business, as we call it, which is very much aligned with the Berry business," Konieczny said.