Paper, Plastics, and Packaging · 2017. 9. 18. · ─Government expenditures contributed 0.8%, the highest contribution by the government sector in the last 15 quarters ─Personal

1 PAPER, PLASTICS, AND PACKAGING

M A R K E T M O N I T O R W I N T E R 2 0 1 4

Paper, Plastics, and Packaging


Contents INDUSTRY & MACROECONOMIC UPDATE 3

PUBLIC SHARE PRICE PERFORMANCE & VALUATIONS 4

M&A ACTIVITY & VALUATIONS 7

MOSS ADAMS OVERVIEW 12


689636

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604 566491

398$49.1

$17.5 $24.7 $26.7 $27.9

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2014

Growing Economy and Strong Valuations are Positive for Packaging Industry

U.S. gross domestic product (“GDP”) was revised upward to 5.0% annually in Q3 2014 from an initial estimate of 3.9%

─ Government expenditures contributed 0.8%, the highest contribution by the government sector in the last 15 quarters

─ Personal spending rose 0.6% in November from 0.3% in October led by plunging oil prices and lower gasoline costs for consumers

─ Inventories were revised higher, with restocking neutral to GDP

─ U.S. factory orders for durable goods fell 0.7% in November due to lower demand for military and defense goods

Risks include slower global economic growth, pressure on exports as the U.S. Dollar strengthens, and rising interest rates on the heels of a clearly strengthening U.S. economy

However, while economists believe the pace of growth likely slowed in Q4 2014 in the range of 3.0%, the strengthening labor market and lower gasoline prices are expected to provide the economy with sufficient momentum in 2015

Overall global packaging deal volume in 2014 decreased 19% while deal values decreased 6%

Lower packaging M&A activity can be attributed to strong equity market performance, increased valuation multiples, and highly competitive M&A auctions; despite these dynamics: ─ Strategic acquirers continue to use M&A to drive growth and realize

synergies by leveraging the significant cash on their balance sheets

─ Financial sponsors are seeking stable assets that generate significant amounts of free cash flow

U.S. GDP Growth

Global Packaging M&A Deal Volume and Value (1)

1) Includes transactions with undisclosed values; figures revised from Summer 2014 publication to include only closed, change of control transactions. Sources: S&P CapitalIQ, U.S. Bureau of Labor Statistics.


S&P 500+12%

Rigid Index+5%

Paper Index+15%

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

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14

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14

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-14

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-14

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Plastic Index+20%

Plastic & Paper Indices Outperform S&P 500; Rigid Index Lags All Other Indices

One-Year Indexed Share Price Performance

Note: The indices in the chart above are composed of the publicly-traded companies listed on page 6. Source: S&P CapitalIQ.


Sales and EBITDA Outlook for Packaging Universe Expected to Lag Overall Market

Source: S&P CapitalIQ.

The sales growth outlook for packaging companies is expected to grow at a modest rate of approximately 1% - 3%, representing 200 – 400 basis points lower than the market

Meaningful EBITDA growth is anticipated over the next 12 months across the packaging industry but is still expected to lag the overall market, particularly in the rigid packaging sector

Public Company Packaging Valuations Next 12 Months: Estimated Growth

Estimated NTM Sales Growth Estimated NTM EBITDA Growth

EBITDA multiples for packaging companies have historically traded in-line or at a slight discount to the overall market

However, the S&P 500 began to trade at a significant premium to the packaging universe from 2010 – 2013, but has since given back some gains in 2014

4.8%

1.0%

1.4%

2.9%

S&P 500

Rigid Packaging

Plastic Packaging

Paper Packaging

10.6%

2.5%

7.4%

9.3%

Paper Index8.6x

Plastic Index11.5x

S&P 50012.1x

0.0x

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EV

/ TT

M E

BIT

DA

Rigid Index9.9x


TTM Data NTM Estimated Growth EV Multiple

Company NameSharePrice 52wk High / Low

MarketCap

EnterpriseValue Revenue EBITDA

EBITDAMargin Revenue EBITDA

TTMRevenue

TTMEBITDA

NTMRevenue

NTMEBITDA

Paper PackagingInternational Paper Company $53.58 $55.73 / $44.24 $23,406 $33,611 $29,119 $3,880 13.3% (18.0%) 10.8% 1.15x 8.7x 1.41x 7.8xMeadWestvaco Corporation 44.39 45.43 / 33.59 7,721 10,478 5,567 945 17.0% 3.3% 12.8% 1.88x 11.1x 1.82x 9.8xRock-Tenn Company 60.98 62.50 / 43.32 8,903 11,869 9,895 1,534 15.5% 2.9% 4.4% 1.20x 7.7x 1.17x 7.4xPackaging Corporation of America 78.05 80.14 / 57.06 7,584 9,811 5,683 1,125 19.8% 7.6% 9.3% 1.73x 8.7x 1.60x 8.0xSonoco Products Co. 43.70 44.69 / 35.64 4,520 5,322 4,911 611 12.4% 6.8% 9.1% 1.08x 8.7x 1.01x 8.0xGraphic Packaging Holding Company 13.62 14.09 / 9.10 4,549 6,573 4,314 673 15.6% (4.0%) 10.1% 1.52x 9.8x 1.59x 8.9xGreif, Inc. 47.23 56.53 / 41.75 2,250 3,681 4,422 492 11.1% 1.6% 1.2% 0.83x 7.5x 0.82x 7.4x

Average $8,419 $11,621 $9,130 $1,323 15.0% 0.0% 8.2% 1.34x 8.9x 1.35x 8.2xMedian $7,584 $9,811 $5,567 $945 15.5% 2.9% 9.3% 1.20x 8.7x 1.41x 8.0x

Plastic PackagingAmcor Limited $11.11 $11.28 / $8.08 $13,646 $16,773 $10,236 $1,432 14.0% (4.2%) 1.5% 1.64x 11.7x 1.71x 11.5xSealed Air Corporation 42.43 43.67 / 28.18 9,072 13,267 7,789 1,067 13.7% (0.6%) 7.4% 1.70x 12.4x 1.71x 11.6xBemis Company, Inc. 45.21 47.20 / 34.34 4,613 5,945 4,929 624 12.7% (11.8%) (4.6%) 1.21x 9.5x 1.37x 10.0xBerry Plastics Group, Inc. 31.55 31.99 / 21.55 3,834 7,639 4,958 704 14.2% 6.6% 21.9% 1.54x 10.9x 1.45x 8.9xHuhtamaki Oy 26.44 26.88 / 21.34 2,741 3,380 2,996 340 11.4% 3.5% 7.3% 1.13x 9.9x 1.09x 9.3xWinpak Ltd. 28.92 29.24 / 19.21 1,880 1,766 768 145 18.9% 11.6% 17.3% 2.30x 12.2x 2.06x 10.4x

Average $5,964 $8,128 $5,279 $719 14.1% 0.9% 8.5% 1.59x 11.1x 1.56x 10.3xMedian $4,223 $6,792 $4,944 $664 13.8% 1.4% 7.4% 1.59x 11.3x 1.58x 10.2x

Rigid PackagingBall Corporation $68.17 $70.50 / $47.75 $9,808 $13,134 $8,534 $1,234 14.5% (1.7%) (0.8%) 1.54x 10.6x 1.57x 10.7xCrown Holdings Inc. 50.90 52.52 / 37.29 7,028 12,373 9,041 1,134 12.5% 8.4% 18.4% 1.37x 10.9x 1.26x 9.2xRexam plc 7.07 9.40 / 6.79 5,264 7,339 6,590 1,009 15.3% 1.5% (14.0%) 1.11x 7.3x 1.10x 8.5xOwens-Illinois, Inc. 26.99 35.83 / 23.31 4,485 7,846 6,942 1,202 17.3% (4.2%) 2.5% 1.13x 6.5x 1.18x 6.4xAptarGroup, Inc. 66.84 68.78 / 55.59 4,533 4,789 2,636 460 17.5% (1.6%) (2.2%) 1.82x 10.4x 1.85x 10.6xCCL Industries Inc. 108.69 111.05 / 66.45 3,798 4,237 2,243 419 18.7% 3.1% 8.8% 1.89x 10.1x 1.83x 9.3xSilgan Holdings Inc. 53.60 54.98 / 43.77 3,422 5,243 3,866 527 13.6% 1.7% 2.9% 1.36x 10.0x 1.33x 9.7x

Average $5,477 $7,851 $5,693 $855 15.6% 1.0% 2.2% 1.46x 9.4x 1.45x 9.2xMedian $4,533 $7,339 $6,590 $1,009 15.3% 1.5% 2.5% 1.37x 10.1x 1.33x 9.3x

($ in millions, except where noted)

Packaging Valuations Continue to Sustain Post-Recession Highs

Note: Not meaningful (NM) if EV/Sales is greater than 5.0x, or EV/EBITDA is greater than 30.0x. NA if denominator is 0, for percentages and multiples, or if estimates are not available. NTM figures are based on the median estimate of Wall St. analysts.

Source: S&P CapitalIQ, company filings and Moss Adams Capital research.


Deal Volume Down in 2014; Deal Values Slightly Down to Flat – Paper Packaging ($ in millions, except where noted)


Date Acquirer / Investor Target Target Description Implied Enterprise Value

EV / Revenue Multiple

EV / EBITDA Multiple

Pending Graphic Packaging International, Inc.

Norampac Inc., North American Boxboard Assets

Boxboard manufacturing and converting assets

$45 N/A N/A

Dec-14 Dunn Paper, Inc. Clearwater Paper Corporation, Specialty Products Business

Specialty paper business and select mills $114 N/A N/A

Nov-14 Eureka Growth Capital Management, L.P.

Jansy Packaging, LLC Designs, engineers, tests and produces packaging solutions for retail clients

N/A N/A N/A

Nov-14 DS Smith Plc Andorrana de Cajas de Cartón Ondulado S.A.

Manufactures carton and paper products $56 N/A N/A

Nov-14 Multi Packaging Solutions, Inc. AGI Shorewood's North American and Asian Print Businesses

Paper packaging and printing business N/A N/A N/A

Oct-14 Orlando Management AG Nordic Paper AS Manufactures specialty papers for use in baking applications

$380 N/A N/A

Oct-14 Green Bay Packaging, Inc. Midcon Holdings LLC Offers corrugated containers and point-of-sale packaging for consumer applications

N/A N/A N/A

Oct-14 Liberty Diversified International, Inc. Harbor Packaging, Inc. Manufactures and distributes corrugated boxes

N/A N/A N/A

Sep-14 Smurfit Kappa Group plc Bates Container LLC Manufactures and supplies corrugated boxes and die-cuts

$158 1.05x 8.5x

Sep-14 Atlas Southeast Papers, Inc. Roses Southeast Papers, LLC Manufactures tissue paper products N/A N/A N/A

Sep-14 Industrial Opportunity Partners LLC Greif, Inc., Multiwall Packaging Division

Manufactures multiwall paper bags used primarily in industrial applications

N/A N/A N/A

Aug-14 Huhtamaki (NZ) Holdings Limited Interpac Packaging Limited Manufactures folding cartons for consumer end markets

$9 0.64x N/A

Aug-14 Rhone Capital, L.L.C. Ranpak Corporation Produces and supplies paper packaging materials and systems

N/A N/A N/A

Jun-14 Duni AB Paper + Design GmbH Tabletop Manufactures tissues and specially printed toilet papers

$85 1.66x N/A

Jun-14 Moorim Paper Co., Ltd. Moorim P&P Co., Ltd. Manufactures printing paper and hardwood bleached kraft pulp

$1,213 1.93x 13.9x


Deal Volume Down in 2014; Deal Values Slightly Down to Flat – Plastic Packaging ($ in millions, except where noted)





Pending Pamplona Capital Management LLP Charter NEX Films Inc. Manufactures monolayer, coextruded, and barrier blown films

N/A N/A N/A

Pending Wendel Constantia Flexibles Group GmbH Manufactures various flexible packaging products

$2,800 1.44x 9.1x

Pending Packaging Dynamics Corporation NOVOLEX Manufactures flexible plastic bag and film products

N/A N/A N/A

Dec-14 Pretium Packaging, LLC Tri-Delta Plastics, Inc. Manufactures plastic components for the packaging industry

N/A N/A N/A

Nov-14 Kohlberg & Company, L.L.C. PPC Industries, Inc. Manufactures flexible packaging products N/A N/A N/A

Nov-14 Raven Industries Inc. Integra Plastics, Inc. Fabrication and conversion of polyethylene and polypropylene products

$48 1.38x N/A

Oct-14 Omega Plastics Corporation Vinylex Corporation Provides custom plastic extrusion solutions N/A N/A N/A

Oct-14 Strategic Value Partners, LLC Linpac Senior Holdings Ltd Manufactures plastic packaging for the food & beverage market

N/A N/A N/A

Sep-14 Behrman Capital Carr Management, Inc. Manufactures and supplies plastic containers

N/A N/A N/A

Aug-14 Orora Limited Worldwide Plastics Company Manufactures R-PET packaging trays and containers for the produce industry

N/A N/A N/A

Aug-14 Summit Equity Group, LLC Lomont Molding, Inc. Manufactures solid injection molded thermoplastic parts

N/A N/A N/A

Jun-14 Toledo Molding & Die, Inc. WEK Industries, Inc. Blow molder of plastic products and systems for the automotive market

$20 0.54x N/A

May-14 Olympus Partners Pregis Corporation Provides protective packaging and specialty flexible packaging for various end markets

N/A N/A N/A

May-14 TC Transcontinental Printing Inc. Capri Packaging Inc. Manufactures printed flexible plastic packaging products

$133 1.85x N/A

May-14 The Carlyle Group LP Signode Industrial Group Manufactures packaging consumables, tools, and equipment

$3,200 N/A N/A


Deal Volume Down in 2014; Deal Values Slightly Down to Flat – Rigid Packaging


($ in millions, except where noted)




Dec-14 Indutrade Benelux B.V. Verbeeck Packaging NV Manufactures bottles and jars N/A N/A N/A

Nov-14 Universal Forest Products Inc. Packnet Ltd. Manufactures custom and industrial packaging products

N/A N/A N/A

Oct-14 A.C. Simmonds and Sons Inc. 2072906 Ontario Limited Manufactures caps & closures for the food & beverage, industrial and medical markets

$10 N/A N/A

Oct-14 Dongwon Systems Corporation Ardagh Metal Packaging American Samoa Inc.

Manufactures metal packaging containers $26 0.53x N/A

Sep-14 Silgan Holdings Inc. Van Can Company Manufactures steel cans for food, poultry, pet food, and chaffing dish heat markets

N/A N/A N/A

Sep-14 Crown Holdings Inc. EMPAQUE Manufactures aluminumcans, bottle caps and glass bottles

$1,225 1.90x 9.4x

Aug-14 Oak Hill Capital Partners Berlin Packaging, LLC Manufactures plastic, glass and metal containers and closures

$1,430 N/A 14.3x

Aug-14 Sonoco Products Co. Weidenhammer Packaging Group Manufactures composite cans, drums and rigid plastic containers

$383 N/A 6.8x

Aug-14 Gilde Equity Management Benelux B.V.

Pack2pack Halsteren B.V. Manufactures steel barrels and plastic drums

$30 0.79x N/A

Jul-14 Myers Industries Inc. Scepter Corporation Manufactures molded plastic packaging products for a broad range of end markets

$117 N/A N/A

Jun-14 KPS Capital Partners, LP Anchor Glass Container Corporation

Manufactures and sells glass containers N/A N/A N/A

Jun-14 RPC Group plc Ace Corporation Holdings Limited Manufactures precision plastic injection molded products such as caps and closures

$427 2.39x 10.5x

Jun-14 Pretium Packaging, LLC Genstar Capital, LLC Manufactures bottles and containers for food, personal care, and medical end markets

$497 2.05x 15.2x

May-14 KKR & Co. L.P. Goodpack Limited Provides intermediate bulk containers (IBCs) used for packing and transporting bulk cargo

$1,234 6.01x 13.7x

May-14 Clayton, Dubilier & Rice, Inc. MAUSER AG Manufactures industrial packaging solutions $1,652 1.00x 6.25x


Overview of Select, Notable Transactions Smurfit Kappa Group’s Acquisition of Bates Container – September 2014

Oak Hill Capital’s Acquisition of Berlin Packaging – August 2014

Smurfit Kappa is a leading producer of paper-based packaging with 41,000 employees in 350 production sites across 32 countries

Smurfit Kappa acquired Bates for $158 million representing an approximately 8.5x EV/EBITDA multiple before synergies and provides Smurfit Kappa with:

─ Increased market presence in the southwest U.S. through a combination with SKOC division (Orange County Container Corporation)

─ Synergies of approximately $12 million over the next 24 months

"This acquisition fits perfectly with our integrated model, complementing in a significant way the successful integration of SKOC which was acquired in December 2012 and providing us with substantial scope for further synergies in both businesses. These synergies will be primarily delivered through additional integration of the containerboard needs of Bates into SKOC’s 350,000 tonnes recycled containerboard mill, with additional savings expected through a range of operational efficiency measures” --- Tony Smurfit, COO, Smurfit Kappa

Bates is a private corrugated manufacturer strategically positioned to serve and grow its customer base in the wider Texas region

Oak Hill Capital is a New York-based private equity firm investing in companies in a broad range of industries worldwide

Oak Hill Capital acquired Berlin Packaging for approximately $1.4 billion representing a 14.3x EV/EBITDA multiple

" The investment in Berlin Packaging is representative of Oak Hill’s theme-based investment strategy and specifically aligns with one of our core themes targeting industry-leading, value-added strategic suppliers. Berlin Packaging is a best-in-class business in a very attractive market with significant growth avenues. We are excited to execute Berlin Packaging’s strategy in partnership with Andrew and his outstanding team” --- Tyler Wolfram, Managing Partner, Oak Hill Capital

Berlin Packaging a leading supplier of rigid packaging products and services in North America

Source: Company press releases, S&P CapitalIQ.

Raven Industries’ Acquisition of Integra Plastics –November 2014

Raven Industries manufactures high quality, high-value technical products for the precision agriculture, specialty films, and aerospace markets

The acquisition provides the combined operations with greater scale and more opportunities for growth in core end markets

"Combining Integra’s fabrication and conversion skill sets with Raven’s ability to develop value-added innovative products will better serve our customers, resulting in an entity that leads the reinforced polyethylene film and sheeting industry" --- Dan Rykhus, President and Chief Executive Officer, Raven Industries

Integra specializes in the manufacture and conversion of high-quality plastic film and sheeting


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Documents

Paper, Plastics, and Packaging · 2017. 9. 18. · ─Government expenditures contributed 0.8%, the highest contribution by the government sector in the last 15 quarters ─Personal