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Crown Cork Stock Shoots Higher on Carnaud Acquisition

May 23, 1995

NEW YORK (AP) _ Crown Cork & Seal Co. Inc.’s stock shot up nearly 15 percent Tuesday following news that it plans to buy Paris-based package maker CarnaudMetalbox.

The deal would make Crown Cork the world’s largest maker of bottles, jars, cans and lids. With such a strong position it would be able to hold supplier prices in check and get new leverage with customers to increase profits, analysts said.

``Crown Cork has shot an elephant and there’s going to be plenty of meat on the table,″ said Pat Dunkerley, packaging analyst at Edward D. Jones.

But as with any merger, some of the biggest cost savings come from eliminating duplicated jobs.

Crown Cork chairman William Avery said there is little overlap between the companies and the merger should provide new growth opportunities ``to keep us all gainfully employed.″

But Avery added, ``If we find we have redundancies, we’ll deal with it appropriately.″

Dunkerley said that with a purchase this big, redundancies are almost certain and that most of the cutting could be expected to come from Carnaud’s corporate budget.

The deal still needs approval of regulators in the United States and Europe. While Crown Cork has not started negotiations with Carnaud, it has gotten agreement from its biggest shareholder _ Compagnie Generale d’Industrie et de Participations _ which controls 32 percent of Carnaud’s stock.

Crown Cork’s stock rose $5.75 to $47.50 per share on the New York Stock Exchange. On the Paris Bourse, Carnaud’s stock rose 29.4 francs, or 15 percent, to 219.1 francs. Crown Cork is offering 225 francs in cash or securities for Carnaud stock.

The deal would give Crown Cork new outlets in Europe for its products and an entry into the U.S. market packaging health and beauty goods.

Combined, the two companies should have the strength to open new markets, Avery said. He added that he thinks the combined company will be the only one capable of producing a new Coca-Cola can that matches the nostalgic contours of its old bottles.

Avery stressed that much of the merger’s savings are expected to come by wringing lower prices from suppliers of plastics, metals and other raw materials.

``When we identify what (each company is) paying, we can buy at the lower price,″ Avery said. ``When we put our volumes together, we can buy at even lower prices.″

With combined purchasing power of $6 billion, a 1 percent savings in raw material costs will add $60 million to the bottom line.

While not willing to estimate the total cost savings that can be achieved, Avery said he’s not planning to push supplier prices too low.

``We’ll work with suppliers so both can be profitable,″ Avery said.

Crown Cork plans to pay nearly $4 billion for Carnaud stock and assume debt to bring the total value to $5.2 billion.

Philadelphia-based Crown Cork found its way to Carnaud’s largest stockholder by way of a former chairman’s son-in-law who happens to be a well-connected Frenchman.

Philippe Delouvrier, whose father served in DeGaulle’s government, is married to Judith Connelly, daughter of John F. Connelly, the man who built Crown Cork into a beverage can leader as chief executive from 1957 to 1989. John F. Connelly died in 1990.

Avery said Delouvrier put him together with Ernest-Antoine Seilliere, supervisory board chairman of Carnaud and head of its biggest shareholder, CGIP. The two met in Paris five months ago.

``We hit it off and very quickly became Bill and Tony,″ Avery said. ``The more I talked the more excited I became about the potential of putting these two companies together.″

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