Amcor, the Australian packaging company, is now positioning itself to become a global leading in beverage packaging production. Chief executive, Russell Jones is playing a major part in cleaning up a fragmented and underperforming sector.
Having recently pulled off the A$ 2.9 billion (€1.74m) acquisition of German-based Schmalbach-Lubeca last week, Jones has now become the 'darling' of the industry sector.
The deal itself was extraordinary. It involved Amcor buying the world's largest manufacturer of PET containers (plastic bottles) and one of the largest makers of food and drink closures (lids) to almost double his company's annual revenue to a massive A$ 11 billion. It could vault Amcor into the top 20 Australian companies, above luminaries like Qantas and PBL.
But perhaps even more extraordinary was the market reaction. The billion-dollar share offer to local and overseas institutions quickly became so oversubscribed that Amcor increased by 20 per cent the amount of stock available, and also hiked the price.
Still the market's appetite for the stock was voracious, and it jumped 14 per cent as soon as it started trading again last week.It speaks volumes for the trust the market has in Jones that investors were prepared to chip in $ 1.2 billion to help buy a complex asset most knew nothing about, simply on his say-so.
The virtues Jones espouses are consistency, financial accountability, lean management and a focus on the bottom line. He has become known for setting realistic targets and then achieving them without fuss.
And also for a lack of sentimentality. When he spun off Amcor's paper assets into a separate company, PaperlinX, in February 2000, he severed the company from its roots in paper-making. Even earlier, the move to unglamorous Abbotsford cut the connection with the south bank of Melbourne, where Amcor's head office had always been in the shadow of its old paper mill, in favour of sending a signal about cost control.
The targets Jones has set, notably the one that aims for a 15 per cent return on funds employed company-wide, and a new acquisition within three years, is the same target he was talking about on his first days in the job in April 1998. He says that target has been reiterated so many times at all levels of Amcor that "it's incredibly well understood right down into the tentacles of the organisation".
The market understands all this because investors have heard the same consistent story as the staff.
As one close observer says: "You can think of other companies that change their strategy on a regular basis, and when that happens, always exceptions sneak in. This is the fourth year in a row that nothing has changed."
In these post-dotcom days, the market is falling over itself to support such consistency, as long as it is backed by good earnings.
But just as well understood is Jones' expansion strategy. He is on a mission, in co-operation with others in the global packaging industry, to consolidate a fractured and underperforming sector.
Packaging companies, many of which are owned by what Jones calls "ageing entrepreneurs" and which in Europe are still based on the idea that each country needs paper mills, bottle plants and glass plants, have seen both their suppliers and their customers consolidate, leaving "the converters in the middle totally squeezed and fragmented".This fragmented industry creates many opportunities, and Jones has been an enthusiastic predator of smaller companies, buying 15 since 1999. As the Schmalbach deal proves, his steadiness does not rule out boldness.
But each new acquisition must fit strictly into Amcor's structure. Within Australia the company wants to be the largest packaging manufacturer, hence its new bottle plant in the Barossa Valley to challenge ACI's monopoly in the wine bottle sector. But overseas, expansion is strictly limited to areas where Jones believes Amcor can become an outright market leader, or a very close second - PET, flexible packaging, closures and tobacco packaging.
He turned down Schmalbach's offer to buy its profitable beverage can business because it did not fit the profile, even though "They would have loved to have sold it to us".
Amcor still has work to do to achieve Jones' aim of being number one in each of the markets he has chosen to contest, but he intends to make no further acquisitions for a while.
"We're going to digest this before we do anything. There is nothing on our horizon at all. We've got to make this work," Jones said.