Two for one
Ardagh Group deal leads to second new employer
- February 28, 2014
A decision by Luxembourg-based Ardagh Group to spend $93.5 million creating a can factory in Roanoke County ranks as one of the largest new investments in Virginia last year.
In fact, Ardagh’s deal packed extra punch for the Roanoke Valley economy. In deciding to renovate the 525,000-square-foot former Hanover Direct building, Ardagh prompted one of its suppliers, Canline Systems, to invest in its own facility in Roanoke County to provide equipment to the can factory.
The two deals will create a combined 121 jobs — 96 at Ardagh and 25 at Canline — with the potential for expansion. The back-to-back announcements provided the Roanoke Valley with the opportunity to tout its appeal to global companies.
“These are pretty sexy projects,” says Jill Loope, director of Roanoke County’s economic development department.
During the official announcement, James Willich, CEO of Ardagh Metal Packaging USA Inc., said Roanoke County stood out for a variety of factors: The “proximity to our major customer, favorable business tax structure, skilled labor and reasonable cost of living for our employees, as well as logistical advantages.”
The behind-the-scenes story on the Ardagh deal, however, shows just how much location, timing and luck factor into landing new employers.
Ardagh, which makes glass and metal containers for the food and beverage industry, used real estate broker Tommy Turner of the Charlotte, N.C.-based Hart Corp. to assist in the search. He previously had worked with a smaller canning company acquired by Ardagh.
Because of a pending contract with a new customer, Ardagh sought to locate a production facility somewhere in Tennessee, western Virginia, the western Carolinas or eastern West Virginia. Turner used an internal database to find buildings in the 200,000-square-foot range.
During the search, however, Ardagh signed a new deal to provide cans for ConAgra Foods in Newport, Tenn. That meant the company now needed a building of 400,000 to 700,000 square feet, with ceiling clearances of at least 28 feet.
“When you looked at the Southeastern U.S. at the time, only four or five buildings fit that criteria,” Turner says.
Early in the process, Ardagh had zeroed in on build-to-suit sites in Berkeley County, W.Va., and Winchester.
The search changed course, however, when another Ardagh building project, on the West Coast, suddenly became more urgent.
“It delayed our time frame on this end, and they just felt a build-to-suit was cutting it too close,” Turner says. “We had to focus on an existing building.”
“All of a sudden the temperature amped up on that project,” says Beth Doughty, executive director of the Roanoke Regional Partnership. “They were in a huge hurry.”
Ardagh’s search focused on the Hanover Direct building, with its modern fixtures and high ceilings. Its first visit in early January last year was devoted to evaluating the Roanoke community — its workforce, quality of life, the cost of doing business — but over subsequent months company officials returned frequently to check logistics for freight distribution, determining whether that could be cost-effective and if it could distribute its product effectively from Roanoke County compared with other potential sites.
At the same time, another global company, Colgate Palmolive, also pursued the building. Ardagh and Colgate vigorously courted the owner of the Hanover Direct building.
Turner says Ardagh delivered its letter of intent to purchase first, but it had to move aggressively and raise its price to seal the deal. Ultimately, that approach paid off: The final sticking points were worked out, and Ardagh officials closed on the contract soon after.
Colgate Palmolive eventually announced it would invest $196 million into a similar-size building in Greenwood County, S.C.
“We could have sold that building three times,” Doughty says. “It’s too bad we didn’t have three of them.”
The incentive package ultimately included $750,000 from the state and $2.4 million from Roanoke County.
“It really emphasizes how important the real estate is,” Doughty says. “Of course you have to have a good business climate and cost structure, but if you don’t have the real estate that meets modern needs, you’re not going to be successful. Their instance of being in a hurry isn’t all that unusual either.”
Ardagh has moved quickly on the Hanover Direct building to strip out the mezzanine floors and outfit it with equipment to produce 4.5 million cans per day, or roughly 5 percent of the U.S. food can market annually.
Renovations and equipment installation should be complete by this summer, with initial startup tentatively set for this fall. The facility should be fully operational by the end of the year.
“I can tell you I fully expect future growth and expansion out of Ardagh,” Loope says. “I think this is just the beginning. They have a pad site that is pre-graded immediately adjacent to their building and can easily expand at any time.”