Almost five years ago, when Sealed Air announced plans to move to Charlotte from New Jersey, local officials gushed over the feat of having landed another Fortune 500 company. Enticed by over $40 million in incentives, the Bubble Wrap maker vowed to bring nearly 1,300 jobs to Charlotte, marking the largest corporate headquarters relocation in city history at the time.
Sealed Air hosted a ribbon cutting for its newly built, 32-acre campus off Tyvola Road in spring 2017. During the ceremony, N.C. Gov. Roy Cooper lauded the company for opening its “amazing facility” and providing “quality jobs.”
The last few years, however, have been bumpy ones for the manufacturer, which also makes packing and shipping materials such as Instapak foam packaging and Jiffy padded envelopes.
Sealed Air spun off a third of the company in 2017, for instance. The Securities and Exchange Commission launched an investigation into the company’s accounting in 2018, and the probe is ongoing.
Late last year, Sealed Air announced a major restructuring to cut costs and focus on its core strengths. The company has fallen short of its job-creation goals as part of its incentives deal with the city and county. And this year, Sealed Air fell off the Fortune 500 list.
Sealed Air declined to make any executives available for an in-person interview. Karl Deily, the company’s chief commercial officer, said in a recent phone interview that a lot has transpired in the years since Sealed Air decided to move to Charlotte.
“Fundamentally the business has been in some level of transition,” Deily said. “We’ve transitioned to Charlotte and we’re committed to grow in the area.”
Diversey sale, Reinvent SEE
Much of the recent churn at Sealed Air stems from the March 2017 sale of Diversey Care, the Wisconsin-based cleaning products company it bought in 2011, as well as Sealed Air’s food hygiene and cleaning unit. Bain Capital Private Equity bought the Diversey business for $3.2 billion, and the company recently moved its headquarters to York County, S.C.
Deily, who ran the Diversey business for five years, said Sealed Air worked for years to improve Diversey’s financial performance and position in the marketplace. Ultimately, Deily said, Diversey may have caused Sealed Air to lose focus on its core business.
“We spent a lot of time and money trying to make Diversey work,” Deily said. “(We decided) we’d be better off being a focused packaging company.”
Since the sale, Sealed Air has been working to “right-size” its business, trimming costs and consolidating functions. “We still had remnants in the company that left us looking like a $7 billion company,” Deily said. The company’s revenue in 2016, before the Diversey sale, was $6.8 billion; it was $4.7 billion last year.
In December, Sealed Air announced an ambitious restructuring plan it’s calling “Reinvent SEE” (Sealed Air’s ticker on the New York Stock Exchange is SEE).
CEO Ted Doheny, in a first quarter earnings call last month, said Sealed Air is in “the early days” of its transformation.
Doheny said that Reinvent SEE is about “simplifying the organization” and “driving profitable growth.” As a leaner company, Doheny said, Sealed Air will be able to increase its speed to market, meaning it’ll be able to respond more quickly to changing consumer demands in areas such as packaging online shopping orders.
Doheny had previously told analysts this year that the company had a voluntary separation program in the fourth quarter of 2018 that resulted in the departure of roughly 200 corporate employees.
But to date, Sealed Air has not said how many people have left as a result of the restructuring plan. The company employs nearly 15,500 globally.
“We had to baseline the business a little bit, and that wasn’t focused on just Charlotte,” Deily said.
While there have been cuts, Sealed Air continues to grow its employee base and invest in expanding its product portfolio, Deily said. For instance, last month the company announced it would be acquiring an automated bagging systems manufacturer called Automated Packaging Systems for $510 million.
APS is “highly complementary” and will be a “growth driver for Sealed Air,” Chief Financial Officer Bill Stiehl said in a recent earnings call.
Sealed Air’s stock is up nearly 27% since the start of the year. In a recent research note, Bank of America analyst George Staphos said that “momentum should build” for Sealed Air. The company is targeting $215 million to $235 million in savings by the end of 2021 through the Reinvent SEE strategy, he noted.
Several months after it sold Diversey, Sealed Air had the company’s name removed from its economic development agreement with the state of North Carolina in November 2017, according to public records obtained by the Observer.
Despite the spinoff of the Diversey business, which employs over 350, Sealed Air remains in compliance with its incentives agreement with the state, according to the N.C. Commerce Department. So far, the state has paid out $4.87 million out of the $36 million over 12 years it agreed to.
When Sealed Air announced plans to move to Charlotte, it said it would create 1,262 jobs in Charlotte by the end of 2017, according to a 2014 statement from former Gov. Pat McCrory’s office. It has fallen a bit short of that: Sealed Air said it currently employs more than 1,000 people at its Charlotte campus, with another nearly 80 job openings posted at that location.
“I can’t reconcile the 1,300 headcount but ... we have exceeded our tax base obligation,” Deily said. “At the end of the day, that’s what the state really cares about.” According to the N.C. Commerce Department, the state’s incentives formula comes out of new taxes generated by the new jobs.
On top of the state money, Sealed Air was promised $4.4 million in incentives from Charlotte and Mecklenburg County, with $1.6 million from the city paid out over seven years as long as it meets certain investment, job creation and salary targets.
“To date, Sealed Air has exceeded its investment targets, but not yet reached its job creation targets, due in part to corporate restructuring and the spinoff of business units,” the county and city said in a joint statement. “The termination date of the grant agreement is Dec. 31, 2024. Once Sealed Air satisfies all grant criteria, it can receive grant payments until the expiration of the grant.”
Sealed Air had said when it moved here that local hires would comprise roughly half the campus workforce; the other half are transfers. When it opened in Charlotte, Sealed Air moved employees from Saddle Brook, N.J.; Danbury, Conn.; Racine, Wis.; and Duncan and Greenville, S.C.
An SEC probe
Sealed Air is also being investigated by the SEC. Last summer, the regulatory agency issued a subpoena for documents, including requests for the company’s accounting for income taxes, financial reporting and disclosures, and other matters.
It is unclear when the investigation will conclude. And few other details of the probe have been made public.
“All we can do is respond to their request for documents,” Deily said. “We can’t share exactly what they’re looking for. But we are operating in full transparency with anything they request.”
Fall from the Fortune 500
Kati Hynes, who oversaw corporate headquarters relocations at the Charlotte Chamber before it merged with the Charlotte Regional Partnership last year, is widely credited with bringing Sealed Air to the city. Landing the company, Hynes said, was like “winning a blue ribbon” for Charlotte.
“Like it or not, communities are measured by how many Fortune 500 companies they have,” Hynes told the Observer. Charlotte has seven and will gain an eighth when the BB&T/SunTrust merger closes this year.
A corporate headquarters relocation draws attention nationally, Hynes said. She cited Honeywell’s plans last year to move its headquarters from New Jersey to Charlotte. “Companies are thinking ‘What does Honeywell know that I don’t know?’ ”
After 21 straight years on the Fortune 500 list, Sealed Air fell off this year. (It’s ranked 555, according to Fortune’s latest ranking, down from No. 456 last year.)
Sealed Air spokeswoman Pam Davis pointed to recent acquisitions — Automated Packaging Systems, foam packaging maker AFP and food packaging manufacturer MGM — as ways Sealed Air will grow its revenue and employee count.
“We anticipate a return to the (Fortune 500) list in the near future,” Davis said in an email.