BOSTON CHICAGO LONDON LOS ANGELES PHILADELPHIA SAN DIEGO SILICON VALLEY TAMPA Q4 2014 PACKAGING CONTACTS David Bench Managing Director (949) 460-6431 [email protected]Tracy Patch Vice President (949) 460-6432 [email protected]Daniel Schultz Director of Business Development (617) 619-3368 [email protected]M&A UPDATE Mergers and acquisitions in the packaging industry are benefitting from further improvements in the economy, which is supporting growth in the industry and continued advances in the sales and profitability results of many packaging companies. Analysts expect the positive economic conditions to persist, amid reports that GDP, employment figures, the manufacturing index and consumer confidence are all advancing in 2014. At the same time the industry, which is still highly fragmented and composed of many privately owned businesses, remains ripe for consolidation. As the M&A environment proves robust for these companies, many of the industry’s private business owners are opting to take advantage of current conditions as opposed to riding out another full cycle. Having been in business for many years, these owners understand that their solid earnings and cash flow could suffer should the economy deteriorate, and they view the current market as an opportunity to retire or otherwise exit. Concurrently, financial and corporate investors are aggressively seeking the right investment opportunities, placing sellers in an advantageous position and boosting valuations. M&A activity is also being prompted by the heightened demands of customers who are requiring costly packaging innovations and a wider range of products and services, all at a lower cost. These pressures are prompting many family-owned businesses in the industry to seek buyers with the resources to better compete in this demanding environment. Add to this the fact that strategic acquirers and investors have substantial cash available for investment, private equity firms have billions in dry powder, debt financing is affordable and available, and the equity markets are strong, and the market appears robust, as reflected by Capstone’s research that shows, through September, 85 transactions have been recorded in the industry this year. M&A Activity: Packaging Industry Sources: Capital IQ, Capstone Partners LLC research YTD 2014 data as of September 30, 2014 112 109 64 69 88 115 97 85 0 20 40 60 80 100 120 140 2007 2008 2009 2010 2011 2012 2013 YTD 2014 Number of Transactions
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BOSTON
CHICAGO
LONDON
LOS ANGELES
PHILADELPHIA
SAN DIEGO
SILICON VALLEY
TAMPA
Q4 2014 PACKAGING
CONTACTS David Bench Managing Director (949) 460-6431 [email protected] Tracy Patch Vice President (949) 460-6432 [email protected] Daniel Schultz Director of Business Development (617) 619-3368 [email protected]
M&A UPDATE
Mergers and acquisitions in the packaging industry are benefitting from further improvements in
the economy, which is supporting growth in the industry and continued advances in the sales and
profitability results of many packaging companies. Analysts expect the positive economic
conditions to persist, amid reports that GDP, employment figures, the manufacturing index and
consumer confidence are all advancing in 2014.
At the same time the industry, which is still highly fragmented and composed of many privately
owned businesses, remains ripe for consolidation. As the M&A environment proves robust for
these companies, many of the industry’s private business owners are opting to take advantage of
current conditions as opposed to riding out another full cycle. Having been in business for many
years, these owners understand that their solid earnings and cash flow could suffer should the
economy deteriorate, and they view the current market as an opportunity to retire or otherwise
exit. Concurrently, financial and corporate investors are aggressively seeking the right
investment opportunities, placing sellers in an advantageous position and boosting valuations.
M&A activity is also being prompted by the heightened demands of customers who are requiring
costly packaging innovations and a wider range of products and services, all at a lower cost.
These pressures are prompting many family-owned businesses in the industry to seek buyers
with the resources to better compete in this demanding environment. Add to this the fact that
strategic acquirers and investors have substantial cash available for investment, private equity
firms have billions in dry powder, debt financing is affordable and available, and the equity
markets are strong, and the market appears robust, as reflected by Capstone’s research that
shows, through September, 85 transactions have been recorded in the industry this year.
M&A Activity: Packaging Industry
Sources: Capital IQ, Capstone Partners LLC research
YTD 2014 data as of September 30, 2014
112 109
64 69
88
115
97 85
0
20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012 2013 YTD 2014
Nu
mb
er o
f Tr
ansa
ctio
ns
SELECT PACKAGING TRANSACTIONS
There have been several notable transactions in the packaging industry this year. A
review of recent transactions shows a variety of businesses have sold and activity on
behalf of both corporate and private equity buyers continues strong. Selected
transactions are outlined below, followed by a more comprehensive list in the
following table.
Milestone Transactions – Several milestone transactions have been recorded in the
packaging industry this year, including the following:
Private equity firm Oak Hill Capital Partners is teaming up with company
management to acquire Berlin Packaging from Bahrain-based investment
firm Investcorp Bank BSC for $1.4 billion (about 1.8x revenue). Investcorp
acquired Berlin Packaging in 2007 for $410 million, and has since made four
add-on acquisitions. Berlin Packaging manufactures, imports and distributes
plastic, glass and metal containers and closures. Berlin Packaging was
founded in 1898, has annual revenue of about $800 million, and continues to
be managed by the Berlin family.
NYSE company, Verso Paper Corp is acquiring NewPage Holdings for $1.4
billion, or about 5.8x EBITDA. The company is a materials supplier to the
packaging industry. It produces specialty papers used in commercial printing
as well as in specialty applications, including beverage bottle labels, food and
medical packaging, pressure-sensitive labels and release liners. The
combination of Verso and NewPage is expected to create a stronger business
that is more efficient and better positioned to compete in a competitive
global marketplace.
The Carlyle Group LP (NasdaqGS:CG), a publicly traded investment firm,
acquired the Industrial Packaging Segment of Illinois Tool Works for $3.2
billion in May 2014, then renamed the entity Signode Industrial Group.
Signode is a global manufacturer of strap, stretch and protective packaging
consumables, tools and equipment. Carlyle invested in the company, “a
highly diversified business with strong management, attractive market
positions and excellent free cash flow,“ to leverage Carlyle’s global network
to support the Company’s growth and help it achieve its full potential as a
standalone company.
In April 2014, Ardagh Group S.A. acquired Saint-Gobain Containers/Verallia
North America, a manufacturer of glass bottles and jars for the wine, beer,
beverage, spirit and food container markets in the United States. Saint-
Gobain Containers was formerly known as Ball-Foster Glass Container
Company and is the second largest glass container manufacturer in the U.S.
Based in Luxembourg, Ardagh Group manufactures metal and glass
packaging solutions for various industries worldwide. The closely-held
company, with clients such as brewer Heineken NV and cosmetics maker
L’Oreal, said the acquisition will increase its glass business by almost 60% and
allows the company access to the very important wine sector in the U.S. for
the first time. Ardagh Group won FTC approval to buy Saint-Gobain
Containers after agreeing to sell six of its nine glass container manufacturing
plants in the United States.
Capstone Partners LLC 2
Packaging Q4 2014
SELECT PACKAGING TRANSACTIONS (CONTINUED)
Middle-Market Transactions – In addition to the milestone transactions that have
transpired in the packaging industry this year, there has also been a steady stream of
transactions involving middle market targets and completed by corporate buyers,
many of which are foreign companies. Several of these transactions are briefly
profiled below.
PSB Industries (ENXTPA:PSB) acquired C + N Packaging, Inc. from majority
shareholder Chris Young and several minority shareholders in September
2014. With plants in North America and Poland, C + N manufactures rigid
plastic packaging closures for fragrance, cosmetic, medical and consumer
product industries. The company has about 100 employees, was founded in
1990, and sells to prestigious beauty customers including Avon, Estée Lauder
and Elizabeth Arden. PSB Industries, headquartered in France, manufactures
packaging and specialty chemical products. PSB intends to leverage C + N’s
complementary strengths in order to add to its client portfolio, strengthen its
position in North America, reinforce its presence in the fragrance segment
and increase its offering to customers through added capabilities.
Worldwide Plastics Company, a manufacturer and distributor of R-PET
packaging trays and containers for the produce industry, was acquired by
Orora Limited of Australia in July 2014. Orora manufactures and supplies
fiber and beverage packaging products in Australasia and New Zealand. Its
products are used in the packing of fresh produce; grocery products;
industrial products; meat, poultry, and seafood; spirits and ready-to-drink
beverages; and wine. In addition, the company purchases, warehouses, sells
and delivers a range of packaging and related materials in the United States,
Canada and Mexico. The bolt-on acquisition was Orora’s first acquisition
since its demerger from Amcor Ltd. in December 2013.
Rieke Corporation acquired the remaining 30% stake in Arminak &
Associates, Inc. from founder Helga Arminak and others for $58 million in
March 2014 that included a cash payment of $51 million plus an earnout
payment of up to $7 million, based on the future success of the company.
Helga Arminak will remain as President. Arminak & Associates manufactures
packaging solutions and components for the cosmetic and beauty, personal
care, skin and body care, hair care, cleaning and household product, and
automotive markets. The company offers a wide variety of bottles and
pumps, atomizers, droppers, canisters, lip balm/gloss cases and other
packaging products. The company was founded in 1999 and has about $80
million in sales with manufacturing facilities worldwide. Rieke Corporation, a
subsidiary of publicly traded TriMas Corporation, develops and manufactures
closures and dispensing systems. Rieke had previously acquired 70% of
Arminak & Associates for $64 million in 2012, making Rieke one of the
world's largest manufacturers of foamers and airless dispensers and
providing the company an entrée to cosmetic and personal care customers.
Rieke says the combined superior product portfolio and enhanced design and
innovation capabilities allows the company exceptional speed to market and
manufacturing flexibility, providing a wide choice of standard and custom
designs to meet customers’ unique packaging needs.
Capstone Partners LLC 3
Packaging Q4 2014
SELECT PACKAGING TRANSACTIONS (CONTINUED)
Private Equity Transactions – Each year we report on the high level of private equity
interest and activity in the packaging sector, and 2014 is certainly no exception. In
fact, there seems to be an unusually high concentration of private equity backed
transactions on the list, several of which are profiled below.
In Capstone’s January Packaging newsletter we profiled Pro Mach, Inc., a
particularly active buyer of companies in the industry. Pro Mach is a provider
of integrated packaging products and solutions for food, beverage,
household goods and pharmaceutical companies. The company provides
primary packaging solutions, end-of-line packaging machinery and
identification and tracking equipment. Pro Mach has a long history of
acquisitions dating back to its inception in 1998, when it was founded by
private equity firm Frontenac Co. The company traded private equity hands
in 2004 and again in 2011. Between 2006 and 2013 Pro Mach acquired at
least 18 middle market companies, targeting private businesses in the U.S.,
Canada and overseas, with revenue between $10-$50 million and retaining
the targets’ management teams to continue running the businesses. The
company’s revenue now exceeds $350 million, and it was named to the Inc.
5000 list of fastest growing companies for the third time in a row. Backed by
The Jordan Company, Pro Mach made two acquisitions in 2014 before being
acquired in a pending transaction by private equity firm AEA Investors LP.
Another packaging company with a long history of private equity backing is
Pretium Packaging LLC. In 2010, the company was acquired by private equity
firm Castle Harlan, Inc., for approximately $130 million. In June 2014,
Genstar Capital, LLC, also a private equity firm, acquired the company for
approximately $498 million. Pretium Packaging manufactures rigid plastic
bottles and containers for food, personal care, household products,
healthcare and pharmaceutical end markets in the United States and Canada.
Pretium is said to fit well with Genstar’s investment thesis for the packaging
industry and Genstar expects to pursue an active acquisition strategy, using
Pretium as a platform and investing in similar opportunities “that benefit
from the attractive secular trends driving growth in the packaging industry.”
In February 2014, Chesapeake Limited, a Carlyle Group portfolio company,
and Multi Packaging Solutions, Inc., a Madison Dearborn portfolio company,
merged. Multi Packaging Solutions provides print, packaging and label
solutions for healthcare, entertainment, consumer, beverage, cosmetics and
media end markets worldwide. The company was founded in 2004, when
Irving Place Capital, a New York-based middle market private equity firm and
the former merchant banking arm of Bear Stearns, formed Multi Packaging as
a platform to acquire specialty printing and packaging businesses. Since
then, the firm rolled up seven different businesses serving the
pharmaceutical, multi-media and consumer markets. Chesapeake Limited
was also previously owned in part by Irving Place Capital, but was sold to The
Carlyle Group in July 2013 for $606 million. Following the 2014 merger, each
company has made an additional add-on acquisition thus far in 2014.
Capstone Partners LLC 4
Packaging Q4 2014
SELECTED 2014 PACKAGING TRANSACTIONS
Enterprise Value ($mm)
EV / LTM
Date Target Target Business Description Acquiror Revenue EBITDA
Pending Pro Mach, Inc. Manufactures a wide range of packaging and processing equipment.
AEA Investors LP - - -
Pending MACtac Manufactures & distributes pressure sensitive adhesive products for labels and other packaging products.
Platinum Equity, LLC $170.0 - -
Pending Berlin Packaging, LLC Manufactures, imports and distributes plastic, glass and metal containers and closures.
Oak Hill Capital Partners
$1,430.0 - -
Pending Ranpak Corporation Produces and supplies paper packaging materials and systems.
Rhone Capital, L.L.C. - - -
Pending The Newark Group, Inc. Produces recycled paperboard products for packaging and other applications.
Caraustar Industries, Inc.
- - -
Pending NewPage Holdings Inc. Produces specialty papers for bottle labels, food and medical packaging and pressure-sensitive labels.
Verso Paper Corp. (NYSE:VRS)
$1,400.0 0.5x 5.8x
Sep-14 Graphic Impressions NW, Inc.
Provides print finishing and full cycle packaging services. Guided Products LLC - - -
Sep-14 S. Walter Packaging Corp.
Provides retail packaging products including bags, boxes, tissue, ribbons, ecopackaging and other items.
Larsen MacColl Partners
- - -
Sep-14 Benchmark Automation LLC
Manufactures packaging automation equipment for food manufacturers in the United States.
Pro Mach, Inc. - - -
Sep-14 Pace Packaging Corporation
Manufactures plastic bottle unscrambling systems used in food, beverage, pharma and other markets.
Pro Mach, Inc. - - -
Sep-14 C + N Packaging, Inc. Manufactures rigid plastic packaging closures for fragrance, cosmetic, medical and consumer products.
PSB Industries (ENXTPA:PSB)
- - -
Aug-14 Square Peg Packaging and Printing, LLC
Designs and supplies glass packaging and off the shelf shipping supplies.
