Owens-Illinois (O-I) is to buy Vitro’s food and beverage glass container business for $2.15 billion.

The transaction, which has been approved by the boards of directors of both companies, is subject to approval by Vitro's shareholders and customary regulatory approvals. The deal is expected to close within 12 months. Vitro is the largest supplier of glass containers in Mexico.

O-I said the transaction provides it with a competitive position in the attractive and growing glass segment of the packaging market in Mexico.

The agreement includes Vitro's five plants in Mexico and one in Bolivia, which together employ 4700 people.

The current leadership of Vitro's food and beverage glass container business will remain in place following the transaction close. The acquired business is expected to generate estimated annual revenue of $945 million and adjusted EBITDA of $278 million.

Further, O-I expects to realise approximately $30 million in run-rate cost synergies by 2018 through a combination of procurement savings and operating efficiencies. The transaction is expected to be accretive to cash flow and earnings per share in the first year after closing.

"We have long admired Vitro's business, and this transaction marks an important strategic step for O-I in that it allows us to establish a strong position in the attractive glass container segment in Mexico," said Al Stroucken, chairman and CEO of O-I.

"O-I is a clear leader in the global glass container market and is the ideal partner for Vitro's food and beverage container business," said Adriàn Sada González, chairman of Vitro.

"We have a great deal in common with O-I and look forward to the expertise they bring to help meet the growing demands of our customers."

Greg Morris