Silgan Holdings Inc. (SLGN) Earnings Call Transcript & Summary

Thank you for joining the call this morning to review Silgan's binding offer to acquire Albea's dispensing business. Today's conference is being recorded. At this time, I would like to turn the conference over to Kim Ulmer, Vice President, Finance and Treasurer. Ma'am, please begin.

Thank you. Before we begin, please be advised that the presentation we will be discussing today is posted on our website, the link to which is disclosed in our press release. Joining me from the company today, I have Tony Allott, Chairman and CEO; Adam Greenlee, President and COO; and Bob Lewis, EVP and CFO. Before we begin, we'd like to make it clear that this communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or any invitation to purchasers subscribed for any security. Certain statements made in the course of this presentation may be forward-looking and involve a number of risks and uncertainties. These statements are only predictions based on our current expectations and projections about future events. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In this regard, you should consider the numerous uncertainties and risks described in our annual report on Form 10-K for the year ended December 31, 2018, and our other filings with the SEC. As noted on Page 2 of the presentation, we include non-GAAP information in the presentation, which is reconciled to GAAP information in the appendices. With that, I'd like to turn it over to Tony.

Thank you, Kim. Welcome, everyone. We're very pleased to be here today to discuss our binding agreement to acquire the dispensing business from Albea Group. This is a business that we know well, and we believe for some time that it's a great fit with Silgan. Adam, Bob and I are going to take you a bit through the transaction itself, a bit about the business and a little about why we think it's such a great fit with Silgan. Before we get there, though, I'd like to turn you to Page 3 and just review again for you our view of long-term value creation and how today's announcement fits in with that. You'll recall this slide from our investor presentation earlier in the year. First off, to the left-hand side, as you all know, we spent a lot of time thinking about building and enhancing, honing competitive advantage in the businesses that we're in. Every day, Silgan wakes up -- Silgan team wakes up thinking about the customers, the challenges and beating competitors and meeting needs of the customer. And so we're constantly honing these franchises. And as you know, we focus hard on strong free cash flow generative businesses and ensuring that that free cash flows. The second part of the strategy in the middle is the important part that, I think, is key here today and that's that we then have the opportunity to deploy that cash as we choose into the market and where we see opportunities. And we get to -- we're selective about that. And today is a good sign of that, where we're very specific about where it is we're deploying that cash. This is a critical part of how Silgan has created value over time and a really important part of understanding the model, the deployment of this cash and the growth that it delivers for us, which takes to the final column, which is that we have delivered top-tier earnings growth over a lengthy period of time by the combination of this franchise and deploying the cash and consistent long-term shareholder value creation. With this announced deal today, the proposed deal, here we go again. Once again, we think this is a great fit to our business. It strengthens our existing franchises, offers more growth to us and even stronger free cash flow generation capability. With that, Bob is going to talk about the transaction itself on Page 4.

Great. Thank you, Tony. We're very happy to announce this binding offer to acquire the Albea dispensing business, and I'll make it clear that this is a carve-out from the Albea Group. It is similar in size, scale and fit to our dispensing business, which we acquired from WestRock in 2017. The purchase price is $900 million, with an LTM revenue of $394 million and adjusted EBITDA on an LTM basis of $77 million, which represents a 20% EBITDA margin. We are expecting to get synergies estimated at $20 million, and that is from the usual Silgan playbook on synergies. And on a synergized basis, the EBITDA margin would be 25% for this business. We do expect to get those synergies on a run rate basis realized in the first 18 months. And the transaction is supported by fully committed debt financing, and that comes in the form of a $900 million committed delayed draw term loan. We do not expect any anticipated changes in our credit ratings. On a pro forma basis, the leverage would be approximately 4x, and that compares favorably to the 4.3x that we had when we were exiting post the Dispensing Systems acquisition back in 2017. We do expect to close this acquisition in the first half of 2020. It is subject to works council, antitrust and other customary regulatory approvals. As we look at valuation, I'll turn your eyes to the right-hand side of this page. And if you look at the headline multiple, it's an 11.7x, in the light green bar. On a synergized basis, that's at an 9.3x, in the green bar, and that compares to our only direct public industry comp and the largest competitor of this business, who was Aptar, at 13.9x. The far right side gives you similar metrics on a cash flow basis. So you can see on a synergized basis, it's an 11.8x multiple compared to a 24x for Aptar. So the net of this is that we feel as though we have a really attractive synergized entry point into this business with the opportunity to create shareholder value on a go-forward basis.

Thanks, Bob. Turning to Page 5. Let me give you a little of our thinking about why we see this as such a compelling opportunity. First, as you can see and you would expect from a Silgan deal, this proposed acquisition would be -- is expected to be strong earnings accretive and, even more so free cash flow accretive to the business. Secondly, given the significant geographic footprint and customer overlap between the businesses, we've identified $20 million of synergies that we confidently believe we can deliver and do so in a time frame where it'd be the run rate within 18 months. These synergies will come from a variety of areas but including procurement, where we both buy resin and metals; in-sourcing to both businesses, in-sourced parts, elements for the finished products that each can make for the other, so there's very nice opportunities for in-sourcing here. There's great manufacturing efficiency as we look at the geographic fit of the business. And then of course, there is a certain amount of SG&A opportunity that sits here. Thirdly, we do view this dispensing business as a franchise with very strong positions in higher-margin dispensing product space. So a good business and very -- in a good space. There's a very good hand-in-glove fit with our existing closures franchise. First of all, there's incredible complementary between the product. Adam is going to give you a little more just color on this. But right now, let me just suffice to say that while our businesses are very similar, there's a lot of difference in the product spreads, and so you kind of bring together a variety of strengths between the 2. Secondly, geographically, we are in similar geographic market. But with this offer, it definitely strengthens ourselves in some of those markets, for example, the Brazilian market and the Chinese market and then in Europe and North America, where a lot of these products are filled and then subsequently distributed around the world. So we see nice geographic strengthening. Thirdly is around the area of customization. I said earlier we spent a lot of time thinking about the needs of our customers. And one of the needs of our customers very much right now is to continue to diversify their products and the channels that they sell through for their products. They're further challenged by the need for meeting sustainability issues. And so there's a lot of new product development that needs to happen in this space for sustainability. Silgan has been on a program of trying to enhance our ability to customize, do smaller runs, smaller design work, et cetera, for our customers, so too has the Albea dispensing business. So we do see really good opportunities on that. And again, this would double our capability of meeting those needs as well as sustainability needs in the market space. The last 2, I would just say that these are right out of Silgan's M&A playbook that we also see opportunities to delever over time and enhance the growth of the business through the acquisition and, in this case, in a higher-growth market space. And then finally, we see opportunities to further grow through acquisition and other continued expansion. Now we've said those exact same words when we did the Dispensing Systems acquisition from WestRock, and here we are today. It opened up -- that acquisition opened up opportunities for us, and we see continued opportunity as we go forward. So in summary, I would just say that we see this as being a great fitting growth franchise that we're acquiring at a single multiple after synergies. With that, Adam is going to give you a little more color on the business.

Thanks, Tony. So turning to Page 6. And what we'll do on Page 6 is take a little bit of a deeper dive into the portfolio of products and markets the Albea dispensing business serves. And in the next page, we'll talk about how that fits in a very complementary fashion with Silgan's dispensing business today. So starting on the left-hand page of -- or left-hand side of Page 6, under the fine mist pumps, this is the largest market for the business we're acquiring, 2 primary end markets, fragrance and skin care. On the fragrance side, really, the focus of this business is on the mass market and on many sprayers for sample products, et cetera. On the skin care side, again, you're going to hear words like prestige and luxury. We're going to use those words often in the description of the business. These are luxury facial spray and moisturizer and products on the beauty side of the business. The growth rate for the fine mist pump section is roughly 3% to 5%. That is mostly in mature market, and we're seeing terrific growth in Brazil for these products right now as well. The second market is under lotion pumps. Again, what I'll describe for the skin care side is the prestige, luxury skin care products with a broad offering of both airless and atmospheric pumps, again, at the very high end of consumer realm. So 3% to 5% growth, those products are growing globally. So we're seeing good reach, regardless of where they're filled, which we'll come back to in a moment. But good global growth for those products in lotion pumps. The foam pumps is one of the more interesting markets when you talk about the complement to Silgan's dispensing business that we'll get to. These are highly sustainable, and it's a highly efficient mean of dispensing product. When you're mixing air with the virgin product itself, you're getting a lower cost option getting product to the customer. So again, we're talking beauty and skin care markets on the prestige and luxury side back to mature markets for that 2% to 3% growth as well. The final market we're going to talk about on Slide 6 are beauty and personal care. This really is primarily the Brazilian business. In Brazil, we're going to represent a broad portfolio of rigid packaging products for cosmetic and beauty applications. So the Brazilian market, our customers there have shown a desire for an integrated supply solution across all products. So we'll be taking not only our pumps, our sprayers to the Brazilian market but also products like lipstick, mascara, tubes and other cosmetic rigid packaging for that market space. Brazil has been a very strong economy for these products. We see a higher growth rate in Brazil for these products at 4% to 6%. And the last thing I'll say is just along the bottom, the geographic footprint. About 30% of the business is filled in North America. Almost half of it is filled in Europe. And importantly, as Tony mentioned on the prior slide, those products are filled in Europe. That doesn't mean they're necessarily consumed in Europe. There's a prestige and luxury portion of what we do. Those products like to be filled in Europe and then dispersed around the world. And then finally, about 20% of the business is done in Brazil. So Page 7, again, talking about that hand-in-glove fit with Silgan's dispensing business, highly complementary, and it's really the combination of both companies' strengths. And when you put the 2 together, we're able to really address the market gaps that exist for both companies. And again, I think what we'll also say is we can execute Silgan's customer-focused customization strategy as we move forward as well. So as you look at the slide on Page 7, you look at metal and plastic closures for Silgan, and that's really about food and beverage. For Albea, their metal closures, where they have presence, really, that's metal decorating, anodizing a product, metal stamping, mostly for high-end aesthetic applications, again, beauty, cosmetics, et cetera. So we're in totally different markets, but we bring an interesting skill set to both ends of those markets. And there should be some overlap between those. If you look at dispensing closures and trigger sprayers for Silgan, those are primarily for home care markets, for lawn and garden, et cetera. You'll see that the Albea business does not have a large presence there. And again, we think we can take those solutions that we have in home care and lawn and garden and apply those to the beauty and cosmetic business and skin care business that Albea does. So the real hand-in-glove is from foam pumps down to the other sprayers listed at the bottom. On the left-hand side with Silgan, again, what I'll tell you is our core markets are personal care and kind of home care, home and garden, et cetera; on the Albea side, beauty and skin care. So we have engines, if you will, that dispense product in a similar fashion but for a completely different market. So the exciting thing for us is taking our technology and our core market and applying it to the Albea business and doing the exact same thing with the Alba business back to Silgan. So for foam pumps as a great example, with our large presence in personal care products, we really don't have much of a foaming solution on the Silgan side. I would say Albea's the clear leader in foaming pumps for beauty and skin care applications. We think there's a great opportunity and that hand-in-glove fit to take that technology back to Silgan markets. On lotion pumps again, primarily for Silgan, we are -- we utilize atmosphere pumps for personal care products. Where Albea has had great success is primarily in airless pumps but also atmosphere pumps for the prestige and luxury skin care products. Again, there's a wonderful overlap and complement for taking existing technology and applying it to different markets served. On the spray pump side, really, this is, for us, our fragrance market. Silgan is very focused on the prestige end of fragrance and high-value fragrance products. We also use in spray pumps -- our spray pumps for the lawn and garden market and home care market. When you move over to the Albea side, their fragrance is interestingly focused much more on the mass market for fragrance, so kind of mid-tier price points of fragrance. They've also done a terrific job in developing many sprayers for fragrance, so again, for samples. It's an entirely new way for consumers to try products, utilizing a spray system created by Albea. We think there's wonderful opportunity across other Silgan dispensing product lines and end markets that we serve as well. For other sprayers, really, that's just the balance of the business for both of us. We play across a wide variety of markets, provide a wide set of solutions to those markets. And again, hopefully, it's clear that the hand-in-glove fit between the 2 is a great complement to both sides of the businesses.

Great. Turning to Page 8. Let's just drop back now and take a look at Silgan in total and the changes that have occurred with Silgan. So today, as you know, we're a $4.5 billion revenue business. Our largest single business in that is our metal container business at 55%. Our plastic containers business is at 14%. And then our closures business is at 31%. I think initially, just to start out, when I joined Silgan, the closures was essentially 0. We had a minority interest in the JV. So if you look back a little further, basically, the dark green there has kind of come from nowhere. If you look down to the adjusted EBITDA today, because the margins are higher in the closure business, interestingly, at -- the closure business is about 41% of our adjusted EBITDA here at $621 million, so a meaningful position in what we are. If you go to the right-hand side, however, and you look at pro forma of this proposed acquisition, the closures business will become 37% of our nearly $5 billion of revenue. But importantly, dropping down, because of the strong profit profile of both of our closure businesses, you'd end up with more than 49% of the business will be in closures. And given the growth rate, that's soon to go over 50%. So I would just say kind of a dramatic change in the total of what Silgan is. That does not mean that food cans to us are negative. And by any means, it's just pointing out kind of what's happening on the closure side. If we look into the closure business, on Page 9, a little bit more, what you see again is, on a pro forma basis, with the deal closed, we would be about $1.8 billion in total revenue. It would be distributed a bit between our metal closures, our dairy, plastic, but more than half would be in the dispensing side. If you come over the upper right-hand side, that would be on a pro forma basis of EBITDA, including synergies, we do have $362 million of total EBITDA. And I think just on the sense of the scope of that, if you compare that to the next -- the kind of the only public comp, as Bob alluded to earlier, that we can think of out there against this business with Aptar on a scale basis, that would be some 60% of the total of Aptar. I think importantly, we also -- the business, as Bob said, it'd be 20% margin business with the proposed acquisition. So again, very nice margin. And more importantly, if you drop down to the bottom of the slide, with $107 million of CapEx in total, the closure business will be about $255 million pro forma of EBITDA. And that means it'd be a 70% conversion of EBITDA to free cash flow, so a very strong cash-generative business, as I alluded to before. That's above Silgan. And as we can see it, Silgan runs above most of the comps in the market space, so very strong cash accretive. Finally, before we turn the page, just on a scale point, we would end up being -- if the deal, when it goes through, would be 42 plants and 8,500 employees, so again, a significant scale. Turning to Page 10. If we try to just think about kind of what would this potentially mean on a value perspective, how we see it, particularly considering the closure business would now be 50% of the total of Silgan, it seems like it would need to be considered in here. And again, as we said, the nearest comp we can think of is Aptar. There's a lot of similarity in the businesses. I want to say here that we have great respect for Aptar, and so we say that in a flattering way. But the fact, as I said, if you look at the margin of this business on a pro forma basis, you end up at 20%, that we view as being quite comparable with Aptar's at 21%. If you look at 5-year growth, assuming the deal goes through, we would have about 15.6% growth. Of course, a lot of that is acquisition-driven. Our target growth would be in the 3% to 4% range. You can see the comparison with Aptar, and I think also that compares well with Aptar's targets for its blended businesses in that play. Dropping down the lower left side, however, you can see that Silgan's multiple is significantly lower than Aptar's. We believe that has to do with the focus on food cans and growth around food cans. But again, with 50% of the business now and something other than that, we think it deserves a look at our 9.9x multiple, and this is as of last week, versus the 13.9x for Aptar; and even more so 15.4x versus 24% (sic) [ 24x ] on a free cash flow basis. Again, recall, the free cash strength on our business. So what we've done on lower right is just that if you took the closure business alone and valued out as a blended Aptar multiples, what value would we be getting? And as you can see here, you get to a $5.6 billion total enterprise value. If you then compare that to Silgan, enterprise value at a 3x leverage rate, our target for the end of the year, add on $900 million for the purchase price of the Albea business and you get to -- and the current equity value as of last week, you get to a valuation of enterprise value of something like $6.2 billion. We think the interesting thing here is that the gap between the 2 is only $600 million, yet the EBITDA of the business that's excluded here is $356 million, so less than 2x multiple for the remaining of the Silgan business. Now ultimately, the market is going to decide what the right comp is and how to figure that out, but it seems clear to us that there is opportunity for some improvement on the valuation basis of the business. Turning to Page 11, just closing it out. As we've discussed in the past, our business model allows us to choose our growth path. We believe we've chosen well today. This is something we've thought hard about and considered very carefully. And as we've indicated here in the bullets to the right, we have the history, we have the team and we have the game plan in place to deliver again on this kind of opportunity. With that, we're going to turn it over to Q&A. Just recall, we have not announced our year-end earnings. We can't get any year-end earnings question. And there's some limit to what we can say about the acquisition. So to that, I'll turn it to you.

[Operator Instructions] And our first question will come from Anthony Pettinari with Citi.

Tony, I think these assets have traded hands in recent years. And I'm just wondering if you could talk a little bit about how long you've been looking at the assets, your due diligence process and just your general feeling about how sort of well capitalized the assets are.

Great. So yes, that is correct. We've been looking at the business, really, even before we got the Dispensing Systems. It would've been one of the ones that would have been on our mind. Certainly, with the acquisition from WestRock of Dispensing Systems, it became much bigger to us in that regard. The business has changed hands a bit. That's part of the entire Albea Group and so not just the dispensing piece. And so that's kind of a new element here. And as a result, we believe this business has been well capitalized over time. There is capacity that sits in the system for us to utilize, to some degree. There will be some spend necessary to get at some of the synergies and opportunities we see. But all of that is definitely going to make us a stronger and better business down the road.

Okay. That's helpful. And then you have a couple of large peers that have bev can businesses that trade at a high multiple, and they've JV-ed or sold their food can businesses or both parts of their food can businesses. And understanding the closures is different than bev cans and your food can business is bigger than theirs, just generally, could this deal change how you think about metal containers and plastic containers within the broader portfolio?

Well, it's an interesting question. First of all, I would say that there are no sacred cows. Everything in Silgan has to earn its stripes every day. But what I would tell you, and I know I'm contrary to many of your reports as of this morning, we feel really good about the food can business. Is it a high grower? No. Is it going to grow at the rate that people are expecting beverage cans to grow? Probably not. It generates a lot of cash. It's very stable. And as we kind of set through the thread of this entire presentation, that cash allows us, first, to invest organically if we want to. And secondly, that's a good acquisition opportunity as we go forward. So I think there's nothing right now that makes us feel anything other than grateful to the food can business for the strength it has delivered over a long period of time and the strength we can expect to continue to deliver for us.

Our next question will come from Mark Wilde with Bank of Montreal.

Tony, just a couple of questions. I wondered if you can talk about how you're going to kind of integrate this with the existing dispensing business, including kind of the management between the 2. And then if you can also talk about just sort of labor and labor rigidity issues with both businesses having a lot of presence over in Europe and I think particularly in France.

Mark, it's Adam. To take at least the first half of that question, we've got 2 talented teams and 2 talented businesses that are coming together here. So really, this is one of those scenarios where, really, we're going to take the best of both, and that will be how we move forward in this business. So we're still learning each other at this point as we've just made the announcement this morning. But there's a lot of really good talent in the business, and it will be run as a global business. And we'll have good, strong regional teams leading our efforts in each of the geographies.

Yes. And on rigidity of workforce, I mean first of all, the -- we are also significant in Europe. We find that works well. There are 2 plants here in France, which is a good thing because much of the market here is in that region, and so that's a plus. Our intention and goal here is completely on growth for our customers and growth in the market. And so we are not looking for anything other than opportunities to continue to grow and support employees. And so that's not a big concern for us.

Our next question will come from George Staphos with Bank of America.

Congratulations, and best of luck to the transaction. I apologize, I'm traveling today, so I didn't see the presentation. I heard your commentary, I think, to an earlier question on investments. My take -- or my question on Albea was, historically, it was a business that required, from our trade research, a little bit of reinvestment, having itself been a combination of Alcan and Rexam. And maybe that was true back then, but it's no longer true now given the investments that have been made. Could you comment a bit more on what might be required here, what might be required in terms of systems integration, again, because it's been sort of a collection of businesses, and I don't know if that's sort of applicable to the actual business you're buying? And then related question around investment and its state of the art level of standing. How would you rate the cycle times for Albea in the business that you're acquiring relative to what you believe to be state of the art work specific to Silgan?

Thanks, George. First of all, I think recall that we're talking about the dispensing portion of Albea business. So I don't know how much of what you're referring to deals with the rest of Albea. What I can talk to is the dispensing part, which we know well. We've been in every one of the plants lately. So we feel very good about the investment level and where they stand on production. That doesn't mean there won't be things that we'll be looking at both ways. I think there are elements they can bring to us. And I think there are elements we can bring to them. But in terms of the idea that they're way behind, we do not see that at all to be true in the dispensing business. And again, the investment that we're making is going to be much more fitting ourselves together, finding ways to continue to develop better products for customers, et cetera. There will be some -- there's real opportunity. One of the things that has been invested here very nicely, Adam talked about the metals side. One of the critical components for our -- many of these dispensing closures is an aesthetic metal element that goes with it. We have [ filed an outside ] as one of the main lead time issues for our business today. Albea has been doing acquisitions on that side in recent years. And so that's actually one of the values that brings to us a better vertical integration of our business, but we intend to continue to try to deploy. The last thing is I know you talked about system integration backlog. I think the business has a lot of that. It was part of a bigger business. And so what's great here is that we already have our dispensing business. And so if we got the backbone of the existing business as we did, we get the best of both commercially, product development, et cetera. And so we've got a really nice opportunity to kind of put together the best pieces here.

Our question will come from Gabe Hajde with Wells Fargo Securities.

A couple of questions for you. One, to the extent that you're able to discuss maybe recent volume trajectory in the business, I guess, one of the other players have discussed a little bit of weaker volume environment here in domestic personal care. Just curious if you guys have been able to discern anything in your diligence.

Yes. So we're certainly aware of that. I think kind of where this business participates, being the Albea business and where our dispensing systems play, generally, we have not seen as much of that. I think it's a little bit more to the nondispensing course of beauty. So we see a little bit in our plastic bottle business and a little bit in some of our other dispensing, but the markets that are really around the Albea piece have not seen that as much. These are markets that tended to be growing globally. Adam mentioned Brazil has been a strong grower for some of these product lines for a while. China is beginning to be a big grower on skin care, particularly with fragrance may be the question down the road. So it's been a pretty steady growth trajectory for the target business opportunities.

Okay. And then Slide 10, thank you guys for all the details here. One of the things I was just curious if you could address or based on some of my history at least with Albea, the margin profile, you compare it to Aptar. But a big component of that is their pharma segment helping reduce that. So when I look at kind of apples-to-apples, kind of their beauty and home running in the 13% to 15% range versus today at Albea at 20% and then potentially going to 25%, is that a customer or product mix or geographic differential seemingly that there's quite a bit of similarities in terms of geographic or just profile? I'm just trying to understand what's driving that.

Rather than us try to get into -- deep into Aptar's numbers, I think what I would say is I think they're like everybody else that there's a blend of margins within a portfolio. And that's true of our 20%, too. There are things that are much higher than 20%. And there are things that are much lower. The point of the slide is only to say that when you blend all that back together, kind of the moat of the businesses looks fairly comparable to one another.

Our next question will come from Ghansham Panjabi with Baird.

Tony, could you touch on customer concentration within the Albea asset? And then just related to Gabe's last question, Slide 6 at the bottom, when you break out the geographies, how has core sales tracked over the years in North America and Europe? Europe has obviously been in an economic slowdown. North America, if you look at the customers for this industry, on the beauty side, they've had mixed performance up from a sales standpoint as well.

Sure. I'll start with the geography one, and then I'll let Adam take the first part. So geographically, what I would say is on the business, the -- what we've seen is that, as I said, Brazil has been a good grower. Europe has been more steady. U.S. has been a little bit weaker as some of the fill sites have moved around a bit. Those have been kind of the general trends. But the basic trend has been volume growth over the last several years for the business and EBITDA growth.

And Ghansham, can you just repeat the first part of your question?

Customer concentration, anybody over 10% or...

No, not for the target business or the combined pro forma.

Okay. And then Tony, you mentioned Aptar Group quite a bit during the conference call. I mean they obviously have a pharmaceutical business that's almost 70% of their EBITDA base as well that's been growing at an outsized rate. Is that an end market that you can see Silgan potentially evolve towards over time just in terms of pharmaceuticals? And does any of your capabilities that you're acquiring with Albea help you directionally get there?

Yes. Thank you. Silgan does already participate in the health care market. So we're a much smaller player by far than Aptar is, but we do participate in that market. And yes, I think the dispensing -- the Albea dispensing business adds a little bit to that, but I think the bulk of that kind of comes from legacy Silgan.

[Operator Instructions] And our next question comes from Chip Dillon with Vertical Research.

This is Salvator Tiano filling in for Chip. Congratulations on the acquisition. I don't know if I missed it. I was wondering if you can talk a little bit about the broader market you're investing, if you have some information about the size, your market share and your positioning more globally or in specific markets and regions.

No. I don't think that would be appropriate at this point. I think all of our information about -- so these markets are the same markets that we're competing in, so I would point you to our 10-K and our previously disclosures.

Next, we have a question from Adam Josephson with KeyBanc Capital Markets.

A couple on the Aptar comparison. So as Ghansham pointed out, I mean 2/3 of their EBITDA, close to it is pharma. This business you're buying doesn't -- as you said, doesn't have much, if any, pharma exposure. So I guess, why compare this deal multiple to where Aptar is trading when Aptar is trading where it is principally, if not entirely, because of its pharma business?

Because Aptar is a blended business like anybody else. And so I think they trade on the total of their blends, like we all do. And so at a blended basis, they're 21% margin. Like I said, and this sounds like -- we think the world of Aptar. The same thing is true of our business. There are elements within our 20% that are double that. And so -- but that's what an average is all about. And I think that's what The Street is trading up.

Okay. Got it. A couple of -- I'm sorry. Just on Slide 10, Tony, the 5-year sales CAGR, just a nuts-and-bolts question here. It looks like just the Aptar, 1.7% growth is just a plain CAGR. It's not a core sales growth number, whereas what you're using for years is just -- is an acquisition plus an organic growth target. So are those -- is that an apples-to-apples comparison you're making there?

As best we can. Our -- the 15.6% is the same thing, the CAGR growth assuming pro forma of this acquisition. And we were trying to be as open and genuine as we could. And so yes, now a lot of that's driven by acquisition. So let's drop back to what we think the core future growth rate is of the business. So we're just trying to give you the best piece of data we could. They have -- like we said, I think Aptar target growth is higher than what's there. So I think that's just as relevant. I just -- I didn't want to put their targets in our presentation.

Sure. And then just in terms of when I compare this to the WestRock deal, you're paying almost 2 turns more for this one. The margin profiles are pretty similar. This business has margins that are about 130 basis points higher, yet you're paying about 2 turns more for this. So can you just talk about the multiple you're paying versus what you paid a couple of years ago for the WestRock business that's rather similar?

Adam, this is Bob. I think getting to your almost 2 turns, I think you're looking at it on a gross multiple basis. And quite frankly, we've never said that we look at things on a gross multiple basis. We look at cash-on-cash. And I think if you look at them on a synergized basis, they're both right around 8.7x from -- on a post-synergy multiple. So I wouldn't at all consider the 2x multiple expansion because it's just not relevant.

Yes. We view this as much more and very comparable on valuation basis.

Okay. Just on the accretion, Bob, can you just -- after purchase accounting, what kind of accretion are you expecting, if any?

Well, yes, we do expect it to be accretive. We're not going to get into the numbers here because it's all going to be based on final purchase accounting and timing of the deal. So we'll come back around with those kind of numbers once the deal closes. But we are expecting it to be accretive both on an EPS basis and strongly accretive on a cash basis.

Our next question will come from Debbie Jones with Deutsche Bank.

Two questions. First, just simply on the pass-through, I didn't see this, but is it -- so here it is. Is there anything notable about the timing of the pass-throughs of this business as it relates to what -- compared to what you currently have?

No, I -- sorry, this is more typical to our Dispensing Systems business. So these tend to be shorter, not as long-term contracts. There tends to be a discipline of passing through materials. In some cases, it really depends. Materials have much less component. These are highly engineered, highly designed products. So it's not as consistent in that regard. But when material becomes important, we have taken that to the market in our business in the past.

Okay. And then my second question, kind of similar to others, on the history of the business. Is this business part of the business that Rexam sold to Sun Capital back in 2012, I think? And did you look at it at the same time because I recall about their high-barrier food business at the same time? And then it was obviously sold a couple of years ago to Sun. So I'm just curious what has changed there broadly that made you more interested now because I imagine, as you said, you know this business and you've looked at it in the past.

That's a good question. First of all, as it happened, we were embroiled in another acquisition, as you've pointed out at that time, so we didn't look hard at all when it moved at that time. This is an element of that total business. Two things are unique to drive that point. The first one is that we then bought the Dispensing Systems business from WestRock and got a meaningful position in dispensing. And then the second part is that this is the first time that we've been aware of the opportunities we'd get at just the dispensing portion of this business. So that's we like what has been, it's really a very nice overlap, complementary in terms of product, but in terms of customers, markets, et cetera, really good overlap between the 2.

[Operator Instructions] And next, we have a question from Daniel Rizzo with Jefferies.

You mentioned Brazil as an exciting growth area. I was just wondering how volatile that region has been over, say, the past 5 to 10 years given some of the macroeconomic swings we've seen in other industries.

That's a really good question. So this business, as you know, Brazil has gone through a fairly challenging couple of years. This business grew nicely all the way through that. So the answer is the teams have done well. The beauty market has done well in Brazil during that time as well. And so while we do watch that and we do think about kind of the geographic risk of countries, we like the profile and the future opportunities for the beauty business in Brazil. And we really like kind of the way this business is structured as kind of a complete set of product lines to that marketplace.

Okay. That's helpful. And then just one other question that you mostly answered, but it doesn't seem like there's a large opportunity for footprint optimization. Is that part of the story at all?

There is some opportunity for footprint optimization on a few specifics, Bob, but that's not -- the big point here is a better, stronger business for growth and meeting the needs of the customer in the future.

Our next question will come from Brian Maguire with Goldman Sachs.

Just a couple of questions, clean up. Just the breakdown in sales between plastic and metal, just wondering if you could break that out. It sounds like it's mostly plastic, but just wanted to confirm that. And just kind of related to that, how do you see this business kind of fitting into the overall debate around sustainability and plastic usage and single-use plastic? Do you think it's generally immune to that given the end markets are a little bit higher end? Or do you think that there'll be more of a shift towards metal over time?

Sure. Brian, it's Adam. As far as the sales are concerned, the metal portion of the revenue is a relatively small piece. So it is predominantly a plastic dispensing business. And I think as you think about -- and I'll use your term, single-use plastic, the very nature of a dispensing -- or a dispenser allows for multiuse of product. So we think this business is incredibly well positioned for the sustainability argument because we are utilizing packaging many, many, many times depending upon its actual purpose and what market it's serving. So we feel really good about the sustainability method. Always room for improvement, but they've done a very nice job positioning themselves.

And to repeat, that's one of the powers of the acquisition because there is going to be continued opportunity to get better even though it's a smaller piece. But together, we're going to be much stronger at being able to develop solutions for customers going forward.

Okay. And the $20 million of synergies, any estimate of how much cash cost it might take to achieve that?

Yes. We don't have all that in just yet. But if you listen to where the bulk of them are coming from, the bulk are coming from purchasing, in-sourcing from one another. So it's going to be a small number. Right now, I'd say kind of in the $10 million range. But I've got to say that's not a finished number yet.

Okay. Just last one for me. In the past, I think there's been some maybe flirting with getting into the best can business. There's been, I guess, an asset in the U.S. that's been kind of rumored to be maybe up for sale. Obviously, you've decided to go in a different direction here. But just wondered if that was part of the thought process, if you looked at that asset, if you had any aspirations to maybe move into a different part of the metal business, how this kind of acquisitions backed up against other potential ones you could have done in that line of the industry.

Sure. I think first of all just to lead you, this is a deal that -- it's typical for us. It will take us something like 4x leverage. So our feeling is that the rate we delever, this gives us other opportunities for other things as they come up. Now I think on bev can, all we've ever said about bev can is we think it's -- we make lots of cans. We think bev cans are no different than that. That's not saying that we're trying to get to bev cans. We've looked at some opportunities along the way, but we've never said one side or the other of that. So I think 2 parts there. I would say this doesn't prohibit or preclude anything else. And I would necessarily say that that's a direction on our mind.

Our next question comes from Tyler Langton with JPMorgan.

Just on the tax rate for the business, is it -- you just got a bigger European exposure, but the tax rate I guess is that much different than Silgan as a whole?

Yes, I think we'll have to get in and dig a little deeper. But I think the assumption is that it's going to be pretty similar to the Silgan tax rate, maybe a little bit lower just in the sense that it doesn't have as much state tax exposure in the U.S. But we don't have a finalized tax rate as we sit here today.

Okay. And then just last question is one on FX. Is it sort of other businesses and, I guess, Europe and Brazil, will that just sort of increase your sort of FX exposure in those regions? Or is anything sort of done -- any business done in U.S. dollars?

Yes. So I think the opportunity here, as we typically do, is we'll finance this transaction with local currencies for the local businesses. And what that has historically meant for us, and I would assume it to be, so on a go-forward basis as well, is that as FX moves, you'll get some geography change from operating profit down into the interest line, but shouldn't have a lot of import on the net EPS line.

Our next question comes from Arun Viswanathan with RBC Capital Markets.

Congratulations on the deal. I don't know if you've already addressed this, but I just wanted to, I guess, understand about the longer-term strategy here. You've discussed potentially creating a new platform for closures and pumps. That now is starting to get relatively more sizable. You also show the valuation gap between you and Aptar in the deck. So I'm just curious, do you think there's further portfolio actions that have to be undertaken to realize and bridge that gap? Is that kind of the motivation to display that slide? And if so would you ultimately consider kind of separating these businesses? Or is that something that we should kind of look forward to in the future?

So a lot to that question. So first of all, I just want to say Silgan has, for a long time, run a portfolio of businesses. It's what we do. It's why we're a holding company. So lots of different kinds of businesses within us. And if you go back to the very first slide I opened up on, the power of Silgan is the strong business we have, the strong cash flow we deliver and deploying that cash flow. And so that's how we think about it. We're going to keep looking at it that way. The reason we show you we can is only to say now we're at a point where 50% of the business is growth here than you're all worried about on food can and needs to be considered in its own life. That's our only point. We're not suggesting that they don't fit together. In fact, we wouldn't have this closure business if it had not been to the food can business and the cash generation that it's delivered for us. So that's the first part. Our motivation is really just to show that path. And we intend to continue to do the same that we've done in the past, which is deploy -- run good businesses with strong position and deploy that cash where we see fit. And again, history here, despite what I read, if you look at our growth against most every other peer out there is that -- so I read regularly that we're a low-growth player, yet if you look at our earnings over time, we're one of the highest growth players in the market. And so -- and that all seems to come from the fact that food cans don't have organic growth. And we just can't say to you that that's not a problem for us. We're in this spot where we can't be light. We think we'll see some growth from that. But more importantly, we have a very steady, stable business that generates a lot of cash for us. While I'm on that point, I just had read a couple of things this morning. I just want to point out again, there's this -- we came into this quarter fully aware that there has been a massive buy for a year ago. So anybody who's surprised by the public information about a decline in food can in this quarter was not tracking our conversations. That was entirely what we've talked about coming out of the quarter. So a lot of big answer to a big question.

Right. Okay. And curious though, is there any kind of -- have you guys looked at the synergies between the 2 businesses if you were to kind of consider separating food and/or at least metal container and closures? Would there be any amount of dis-synergies in that scenario?

Not particularly, but that's really not the plan of where we're headed. That's not -- again, Silgan is a holding company. We can own a multiple of different businesses. But no, there's no particular dis-synergies there.

And then just lastly, just internationally speaking, we've seen some nice growth in the luxury segment for pumps and sprays. Is that pretty much the growthiest area of this business? And does that subject you to some of those luxury trends? Or anything -- any comments on that?

It's one of the growth opportunities are in international. The other growth opportunities are marrying the strength of our business together. Our business, as Adam said, is much more personal care strong. This business is much more beauty strong. So there's also the opportunity to kind of marry up those capabilities for both of those markets. Take some of what Albea does on the beauty side and bring that to personal care. Take some of what we do in the personal care side and bring that to beauty. So there's several growth opportunities.

And our last question will come from Gabe Hajde with Wells Fargo Securities.

Hopefully, 2 quick follow-ups. I appreciate. We'll talk to you in 2 days as well. Anything from a regulatory standpoint that seems irregular? Or do you envision just kind of normal course of regulatory approval process?

Yes. So the -- I would say we've got kind of an ordinary process. As you can imagine, there are several jurisdictions that need to give us approval. So we'll go through that. As we said here today, we see a lot of complement in the fit. So our expectation is we'll get through that and get closed in the first half of the year.

Okay. And then I think Slide 14 shows a $1 million adjustment for reorganization. I'm assuming that's sort of restructuring-oriented activity. When you look back kind of in the history of this kind of closeout, which is probably difficult given it's changed hands, but have restructuring been a bigger part of the story prior to this LTM period?

No, no, not particularly in the dispensing side.

And that was our last question. I'd like to turn the call back over to Mr. Allott for closing remarks.

Great. Thank you all for your time today, and we look forward to talking to you on Wednesday about our fourth quarter and year-end. Thank you.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect, and please enjoy the rest of your day.