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Top News in PLASTICS AND PACKAGING
M&A Quarterly
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www.pmcf.com
PLASTICS & PACKAGING 2013 YEAR IN REVIEW
John D. Hart 248.223.3468 [email protected]
Matt G. Jamison 248.223.3368 [email protected]
Ryan R. Shuchman 248.603.5372 [email protected]
James R. Petersen 248.603.5319 [email protected]
Daniel M. Ratliff 248.603.5326 [email protected]
Scott S. Rohlig 248.603.5232 [email protected]
About PMCFP&M Corporate Finance (“PMCF”) is an investment banking firm, focused exclusively on middle market transactions, with professionals in Chicago, Detroit, and across the globe through Corporate Finance International affiliates. Our dedicated Plastics and Packaging Group has deep industry knowledge and covers a wide range of processes including thermoforming, extrusion, blow molding, injection molding, and resin and color compounding. Offering a breadth of advisory services, the Plastics and Packaging Group has helped clients worldwide meet their sale, acquisition, financing, and strategic growth objectives.
Investment Banking Services:
• Mergers & Acquisitions
• Sales & Divestitures
• Capital Raising
• Sale Planning
CHICAGO225 W. Washington Street, Suite 2700Chicago, IL 60606312.602.3600
DETROIT26300 Northwestern Highway, Suite 120Southfield, MI 48076248.223.3300
PMCF Transaction Announcements
Packaging: MedicalRecapitalization with Private Equity
ThermoformingCompany Sale for Family Shareholders
pmcf.com
M&A Quarterly – Plastics & Packaging
2
2013’s plastics and packaging deal volume, which trended below 2012 levels by over 10%, requires careful evaluation as the numbers alone do not fully reflect market conditions for the year. Plastics and packaging M&A declined by 54 trans-actions, to 328 deals in 2013, versus the 382 deals completed in 2012. However, 2013 was impacted by very low deal count in Q1 2013 and rebounded across three straight quarters of increasing activity through the end of the year. By Q4 2013 PMCF noted M&A levels similar to 2012’s quarterly averages, which reflects very healthy market conditions.
Supporting continued deal flow in the industry were strate-gic buyers leveraging M&A to expand product offerings, enter new segments, grow into new geographies, or simply to take out a long term competitor. Stable, slow growth domestic eco-nomic conditions have allowed strategic players over the last several years to drive up cash reserves for acquisitions. In 2013, strategic groups increased to 65% of buyers across all M&A transactions.
However, private equity remains very active and are key contributors to the current market condi-tions which feature buyer demand exceeding seller supply. Current private equity buying activity includes groups aggressively seeking new platforms and those completing buy and build strategies. 2013 also featured several private equity groups who elected to sell their plastics and packaging holdings, allowing them to capitalize on strong market pricing and demonstrate returns to investors.
Key 2013 plastics and packaging M&A trends include the following:
• Strategic buyers remained extremely active in plastics M&A, accounting for nearly twice as many deals as private equity groups
• Transactions involving thermoformers and resin suppliers each increased by 6 deals versus 2012, while injection molding and specialty processor deals experienced the largest year over year declines
• Packaging transactions remained flat year over year as a slight increase in flexible packaging deals was matched by a decline in bottling transactions
• The food & beverage end market became the second largest segment among plastics M&A, in-creasing by six transactions to account for 17% of 2013 deal flow
• Publicly traded plastic and packaging companies outperformed the S&P 500 throughout 2013 as average EV/EBITDA trading multiples exceeded 8.0x for the entire year
The M&A market for plastics & packaging during 2013 featured a number of marquee transactions, including:
• Jabil Circuit Inc.’s (NYSE:JBL) acquisition of Nypro for $665 million in February 2013
• Mexichem’s acquisition of PolyOne’s (NYSE:POL) PVC resin business for $250 million in March 2013
• Pexco, LLC, a holding of Odyssey Investment Partners and The Carlyle Group (NasdaqGS:CG), acquired injection molder Spectrum Plastics Group from Spell Capital in September 2013
• WNA’s acquisition of thermoformer Par-Pak, Ltd. for more than $300 million in June 2013
• Silgan Holdings, Inc.’s (NasdaqGS:SLGN) acquisition of molded closures supplier Portola Packag-ing, Inc. for approximately $270 million in August 2013
The increasing M&A trends through the latter three quarters of 2013 illustrate a healthy market for transactions. We believe these market conditions are likely to be sustained in the near term of 2014 as both strategic and financial buyers remain active as buyers. Industry consolidation trends con-tinue to create favorable conditions for sellers as fewer attractive, high quality businesses have been available to meet demand among buyers. However, 2013 is the fourth year in a row of robust M&A market conditions and we must acknowledge the cyclicality of sell-er’s markets. As such, organizations thinking about a sale may wish to finalize prepara-tions or launch a marketing process to take advantage of favorable pricing.
Strategic Financial Add-On Financial Platform
220
55
72
347
235
68
79
382
213
56
59
328
213
55
58
326
198
44
59
301
199
61
80
340
266
60
67
393
0
50
100
150
200
250
300
400
350
2012 201320082007 2009 2010 2011
Num
ber
of D
eals
Q4 2013 Market Summary & Outlook
2013
2012
Rigid Packaging15%
Industrial14%
Consumer2%
Bottles4%
Resin15%
Custom Molding30%
BuildingProducts
8%
FlexiblePackaging
12%
Sector‘12 – ’13 Change
Injection Molding
Blow Molding
Film
Resin/Color & Compounding
Sheet & Thermoforming
Specialty
Total
201118
106
75
56
32
60
347
30
110
68
62
32
80
382
8%
29%
18%
16%
8%
21%
100%
22
86
60
68
38
54
328
7%
26%
18%
21%
12%
16%
100%
-8
-24
-8
6
6
-26
-54
-27%
-22%
-12%
10%
19%
-33%
-14%
2013% of Total
% of Total2012
% Change
Source: P&M Corporate Finance, Company Reports
Flexible
Rigid Packaging18%
Industrial9%
Consumer2%
Bottles3%
Resin21%
Custom Molding23%
BuildingProducts
9%
FlexiblePackaging
15%
Transactions by Product Segment
M&A Quarterly – 2013 Year in Review
PMCF
3
Global Plastic Packaging M&A
Trends in M&A:• Packaging transactions remained flat year over year, reflecting the segment’s strength in light of lower plastics and packaging
transaction volume overall, accounting for 118 deals and approximately 36% of plastics M&A during 2013• Transaction mix among strategic and financial buyers favored strategic parties, which were most active in totaling 71 deals and
60% of packaging transactions, an increase of 6 deals versus 2012• Food & beverage packaging transactions remained the largest end market within packaging M&A, growing 7 deals to total 54
transactions in 2013, while medical packaging experienced the strongest growth year over year, increasing by 9 deals
Transactions by Buyer Type Transactions by End Market
0
20
40
60
80
100
120
140
65
53
118
2012
66
48
114
2011
71
47
118
2013
52
39
91
2008
65
51
116
2009
80
51
131
2010Strategic Financial
Num
ber
of D
eals
Food and Beverage
Industrial
Consumer
Construction
Medical
Automotive
Transportation
Electronics
Total
47
32
30
-
8
1
-
-
118
54
23
20
-
17
-
2
2
118
20132012
Industry News:• November 2013 – A recent study of the recycling of food-service packaging products found the amount of contamination on used
containers was much lower than previously thought, an encouraging step toward recycling these types of products. The study, by the Falls Church, VA-based Foodservice Packaging Institute, examined the levels of food residue on a variety of food service packaging. Although the study was based on a small sample size, the results showed little difference in the amount of contamina-tion between food-service packaging and food-contact packaging. Based on the report, food contamination appears to be more of a perceived versus an actual barrier to recycling, according to FPI President Lynn Dyer.
• December 2013 – The Society of the Plastics Industry and the American Chemistry Council announced a partnership to advocate on the behalf of rigid plastics packaging manufacturers. The combined group will focus on key rigid packaging issues including recycling, growth, and unnecessary regulation. SPI is in the process of forming a rigid plastics division with two subgroups, one focused on thermoforming and another on transportation and industrial rigid plastics. SPI’s thermoforming division will partner with ACC’s rigid packaging group with the goal of gaining efficiencies and increasing member engagement by having a single fo-cused team. The partners plan to have a rigid plastic packaging conference in the spring of 2014.
Featured Sector Transactions October 2013 – Buena, NJ-based Comar, Inc. completed a recapitalization with Newtown Square, PA-based private investment firm Graham Partners. Comar is a market leading designer and manufacturer of innovative packaging solutions and liquid dis-pensing products, serving the pharmaceutical, diagnostic, health, and personal care markets. The transaction, and Graham’s partnership with Comar’s management, will provide access to additional capital and resources to support Comar’s global expan-sion plans and further broaden the Company’s product development and manufacturing capabilities in North America. P&M Corporate Finance served as the exclusive financial advisor to Comar, Inc. in this transaction.December 2013 – RPC Group plc (LSE:RPC) announced its acquisition of England-based rigid packaging firm Maynard & Harris Group Ltd. from private equity group Caird Capital for approximately $170 million, or 6.7x EBITDA. Maynard & Harris manufac-tures blow and injection molded plastic packaging for the personal care, healthcare, and food segments. RPC Group expects the acquisition will grant it more geographical diversity and bolster manufacturing capabilities in the United States via Maynard & Harris’ Winchester, VA plant. Following the acquisition, Maynard & Harris will operate as an independent division within RPC’s Bramlage business and is expected to enhance the group’s leading personal care product portfolio in Europe and the United States.
Flexible
Public Acquirer
27%
Private Acquirer
28%
PE to PE8%
Private Equity(PE)37%
Public Acquirer
25%
Private Acquirer
35%
PE to PE7%
Private Equity(PE)33%
RigidFlexibleBottling
Total
584614
118
49%39%12%100%
# % Packaging # % Packaging584911
118
49%42%9%
100%
20132012
2012 2013
Buyer Type
Packaging Transaction Detail
Sources: P&M Corporate Finance, Plastics News, Company Reports, Freedonia, SPI, American Chemistry Council, and Foodservice Packaging Institute
pmcf.com
M&A Quarterly – Plastics & Packaging
4
Global Injection Molding M&A
Trends in M&A:• Transactions involving plastic injection molders remained an active segment of plastics M&A in 2013 at 86 transactions and 26%
of total deal volume; however, total volume declined by 24 deals year over year driven by a weaker first half that posted 22 fewer deals versus 2012
• Electronics transactions experienced the strongest growth versus 2012, while deals involving injection molders that serve food & beverage, construction, and transportation end markets also experienced growth in 2013. Automotive and industrial deals regis-tered the largest declines
• Strategic buyers remained very active in injection molding transactions, increasing from 53% in 2012 to 66% of injection molding deals in 2013 and increasing competition for private equity buyers seeking attractive acquisitions in the space
Industry News:• December 2013 – Injection molding machinery sales were up 5% in the United States during 2013, with signs pointing to a strong
year in 2014 for North American manufacturing as the automotive sector continues to purchase injection presses, according to discussions with machinery industry executives during the K 2013 trade show in Germany. With U.S. automotive sales reaching nearly 15.5 million in 2013 and the average age of cars on the road at 11 years, analysts expect automotive sales to top 16 million in 2014, for the fifth consecutive year of growth in the segment. Rebounding auto sales haven driven injection press sales from a low of 1,285 in 2009 to 3,307 in 2012, with an expected 3,400 to 3,500 in machine unit sales for 2013. In addition to the strong year over year growth, the injection press industry has experienced growth in each consecutive quarter since Q2 2012.
• December 2013 – Speaking at the MexicoNow conference in early December, GE Capital Mexico Managing Director Alfredo Espino noted the production of automotive parts in Mexico is 13% cheaper than in the U.S., with injection molded parts in particular costing 20% less to manufacture in the country. These lower costs are leading more car manufacturers to consider opening plants in Mexico, which already has 15 light vehicle plants in operation and another three plants under construction. Further support-ing a shift in manufacturing to Mexico is the improving tool making situation in the country, as European toolmakers are setting up shop in Mexico to meet growing demand. Previously, most molds were imported, making it more costly for manufacturers to service molds.
Featured Sector Transactions October 2013 – Vention Medical, Inc., a portfolio company of Denver, CO-based private equity group KRG Capital Partners, an-nounced its acquisition of Fast Forward Medical for an undisclosed amount. Headquartered in Plymouth, MN, Fast Forward Medical is a manufacturer of injection molded medical packages and components for a variety of sterile and non-sterile clinical procedures. Fast Forward’s products have applications in cardiology, radiology, vascular access, neurology, and other inter-ventional disciplines. Based in Salem, NH, Vention Medical is a manufacturer of medical devices and components for all major medical and diagnostic subspecialties.November 2013 – Sweden-based injection molder Rosti AB has acquired a majority stake in food and beverage packaging manu-facturer Tebplast Plastik for an undisclosed amount. Based in Istanbul, Turkey, privately-held Tebplast manufactures decorated packaging products using 40 injection molding lines with in-mold labeling technology. Its products include of variety of thin wall containers and lids primarily for dairy, fresh, chilled and frozen food applications. The acquisition is a key part of Rosti’s long-term growth plan, which includes both M&A and organic growth, in an effort to establish the company as a €600 million company by 2016.
2012 2013
Buyer TypePublic
Acquirer20%
Private Acquirer
33%
PE to PE10%
Private Equity(PE)37%
Flexible
Public Acquirer
23%
Private Acquirer
43%
PE to PE4%
Private Equity(PE)30%
U.S.-to-U.S.
U.S.-to-Foreign
Foreign-to-U.S.
Foreign
Total
Distressed
29
5
3
49
86
5
44
10
11
45
110
1
20132012
Sector Deal Statistics
Sources: P&M Corporate Finance, Plastics News, Company Reports, GE Capital
Transactions by Buyer Type Transactions by End Market
0
20
40
60
80
100
120
58
52
110
2012
67
39
106
2011
57
29
86
2013
47
32
79
2008
43
44
87
2009
70
36
106
2010Strategic Financial
Num
ber
of D
eals
Food and Beverage
Industrial
Consumer
Construction
Medical
Automotive
Transportation
Electronics
Total
8
36
20
1
21
18
-
6
110
10
15
18
2
16
11
3
11
86
20132012
M&A Quarterly – 2013 Year in Review
PMCF
5
Global Film M&A
Trends in M&A:• Transactions involving plastic film extruders and converters declined by 8 deals in 2013 compared to 2012 while deals involving
film processors for flexible packaging applications experienced year over year growth of 3 transactions• Film M&A experienced growth in food & beverage, consumer, transportation, and electronics end markets as deals involving U.S.
buyers also increased by four transactions in 2013 versus 2012• Transaction mix among strategic and financial buyers remained relatively consistent, with a moderate increase in total share for
strategic buyers, which were up 2% to account for 68% of film deals in 20132012 2013
Buyer Type
Flexible
Public
Acquirer34%
Private
Acquirer32%Private Equity
(PE)27%
PE to PE7%
Flexible
Public
Acquirer33%
Private
Acquirer35%Private Equity
(PE)25%
PE to PE7% U.S.-to-U.S.
U.S.-to-Foreign
Foreign-to-U.S.
Foreign
Total
Distressed
18
1
4
45
68
-
2012
19
4
3
34
60
2
2013
Sector Deal Statistics
Sources: P&M Corporate Finance, Plastics News, Company Reports
Transactions by Buyer Type Transactions by End Market
Food and Beverage
Industrial
Consumer
Construction
Medical
Automotive
Transportation
Electronics
Total
22
18
14
-
3
-
1
2
60
2013
20
24
13
1
6
3
-
1
68
2012
Industry News:• November 2013 – The 3M Company (NYSE:MMM) recently invested in laboratory equipment to evaluate the impact of certain ad-
ditives in the manufacturing of cast or blown film. As market trends indicate a growing interest in using optically clear multilayer film for applications in food packaging, processors have experienced production issues resulting from different combinations of polymers and layers of film. 3M’s lab is studying the impact of using its Dynamar polymer processing additives, which the com-pany says can provide a solution to clarity problems while also improving surface properties and reducing pressure during the production process to increase output and create cost savings. 3M’s lab will study the use of these additives under different condi-tions to enable them to determine the appropriate concentration and application method for each customer’s formulation prior to full-scale production.
• December 2013 – The Coca-Cola Company (NYSE:KO) is in the process of developing a new shrink sleeve packaging solution for full bottle labeling that is expected to ease recycling for shrink sleeve labeling. Until now, traditional PET shrink sleeve labels have made it difficult for recyclers to process by causing problems with optical sorters, float tanks, and air separation technology, resulting in contamination to the clear PET grind from the bottles. Coca Cola’s new labels are made from a polyolefin mix that can be mixed with clear bottle flake in float tanks, as the PET will sink to the bottom of the tank while the label flakes remain afloat. Recyclers hope more companies will take note of Coca-Cola’s progress and implement similar labeling material changes to allow for easier recycling of the plastic labels. The technology could also be applied to other plastics and packaging products where cross contamination of materials creates a roadblock for recycling processors.
Featured Sector Transactions November 2013 – Franklin Park, IL-based Transilwrap Company, owned by Nicolet Capital, was acquired by New York private equity firm The Jordan Company for an undisclosed amount. Transilwrap is a specialty films manufacturer and converter with eight manufacturing facilities and nine distribution centers throughout North America. The company’s manufacturing capa-bilities include liquid and extrusion coating, sheet extrusion, slitting, sheeting, magnetic striping, and specialty printing. The company serves primarily packaging, security, healthcare, office products, print media, and industrial markets. The Jordan Company plans to support Transilwrap’s growth via market expansion, new product development, and strategic acquisitions.December 2013 – Pall Corporation (NYSE:PLL) announced its agreement to acquire the Life Sciences business from ATMI, Inc. (NasdaqGS:ATMI) for $185 million. Based in Port Washington, NY, Pall manufactures filtration, separation, and purification solutions across a broad range of life sciences and industrial applications. ATMI’s Life Sciences division is a leading producer of single-use bioprocess systems and consumables, including custom-engineered flexible packaging, storage systems, and other products for pharmaceutical and biopharmaceutical applications. The acquisition is expected to strengthen Pall’s portfolio of advanced solutions for biopharmaceutical customers.
Strategic Financial
45
23
68
2012
48
27
75
2011
41
19
60
2013
35
19
54
2008
35
27
62
2009
51
27
78
2010
Num
ber
of D
eals
0
10
20
30
40
60
80
50
70
pmcf.com
M&A Quarterly – Plastics & Packaging
6
Global Resin and Color & Compounding M&A
Trends in M&A:• The resin and color & compounding sector was one of only two plastics and packaging segments to experience growth in 2013,
increasing to 68 transactions versus 62 deals completed in 2012• Deals involving color & compounders posted the largest increase of the segment, accounting for 35% of deals in 2013 compared
to 21% in the previous year• Deal flow involving domestic and foreign buyers experienced year over year growth as transaction volume was up four deals
amongst U.S. buyers and two deals amongst foreign buyers
Sector Detail 2012
Industry News:November 2013 – During the Global Plastics Summit in Chicago executives from Dow Chemical Co. and Berry Plastics Group spoke about their expectations for both processors and suppliers to benefit from the discoveries of shale gas in North America. New sup-plies of shale-based natural gas has driven regional resin suppliers, such as Dow, to add capacity for the first time in several years as shale gas is used to make ethane and then ethylene, which is a key feedstock for many plastic resins, including polyethylene and PVC. Shale expansion is expected to create 485,000 petro-chemicals related construction jobs, 55,000 resin production jobs, and 10,000 plastics manufacturing jobs. Further, Berry Plastics’ EVP of Global Purchasing noted the increased availability of PE will allow plastic to make further inroads into the $170 billion global packaging market.December 2013 – According to a recent Plastics News survey of regional resin distributors, industry executives generally viewed 2013 as a strong year, as many expected stronger growth. Distributors noted an optimistic outlook for resin in 2014, despite concerns for resin availability, as resin makers have eliminated some grades sometimes driving customers to requalify the materials. The focus among most North American resin distributors in 2014 is centered around the large amounts of resin capacity expected to come online in the region over the next five years. PE, PP, and PVC supplies are expected to be driven by the availability of shale gas, while executives also noted they expect increased capacity for PET. Increased resin capacity in North America should also create a more stable supply, meaning less volatility and fewer turnarounds.
Flexible
Color &Compounding
21%
Resin Supplier79%
Flexible
Color &Compounding
35%
Resin Supplier65%
Sector Detail 2013
2012 2013Buyer Type
Flexible
Private Equity(PE)26%
PE to PE3%
Public Acquirer
34%
Private Acquirer
37%
Flexible
Private Equity(PE)15%
Public Acquirer
47%Private Acquirer
29%
PE to PE9%
U.S.-to-U.S.
U.S.-to-Foreign
Foreign-to-U.S.
Foreign
Total
Distressed
20
7
1
40
68
-
2013
19
4
5
34
62
-
2012
Sector Deal Statistics
Sources: P&M Corporate Finance, Plastics News, Company Reports
Transactions by Buyer Type
Featured Sector Transactions December 2013 – Solvay SA (ENXTBR:SOLB), a Belgium-based manufacturer of plastics and chemicals, announced the sale of its approximately 70% stake in Brazil-based Solvay Indupa S.A.I.C. to Braskem SA (BOVESPA:BRKM5) in a transaction which valued the total enterprise value of Solvay Indupa at $290 million. The deal includes Solvay Indupa’s two PVC plants located in Brazil and Argentina, which have a combined capacity of more than 1 billion pounds per year. Braskem is a resin manufacturer based in Sao Paulo, Brazil. In a related transaction, Solvay announced an agreement to sell its Benvic PVC compounding busi-ness to private equity group OpenGate Capital, a deal which is expected to close in the first half of 2014. The divestiture is part of Solvay’s strategic plan to reduce exposure to economic cycles and energy-intensive businesses.December 2013 – Days after announcing an agreement to acquire the Benvic PVC business from Solvay, Los Angeles, CA-based private equity firm OpenGate Capital announced its acquisition of Kem One, a PVC maker based in Lyon, France, for an undis-closed amount. OpenGate joined private investor and competing bidder Alain de Krassny for a joint proposal to purchase the business. The transaction will be the first of two recent PVC-related deals closed for OpenGate with its Solvay acquisition set to be completed in the first half of 2014. Kem One reported sales of approximately €1.1 billion in 2012. The company’s global footprint spans across 10 countries, with 22 manufacturing sites.
0
10
20
30
40
60
80
50
70
42
14
56
44
18
62
52
16
68
39
12
51
42
16
58
58
71
Strategic Financial2011 2012 20132008 2009 2010
13
Num
ber
of D
eals
M&A Quarterly – 2013 Year in Review
PMCF
7
Global Sheet and Thermoforming M&A
Trends in M&A:• M&A activity among sheet and thermoforming processors grew by 19%, or 6 deals, in 2013 as transaction volume increased by
3 deals each for both sheet extruders and thermoformers• Transactions among foreign and domestic buyers each increased in total deal activity within the sector while acquisitions of U.S.-
based sheet and thermoforming companies remained flat at 13 transactions• Medical sheet and thermoforming deals experienced the strongest growth in 2013, while food & beverage deals continued to lead
in overall deal count at 14 transactions. Consumer and electronics transactions were the only end markets to experience declines versus 2012
Industry News:• October 2013 – Inline Plastics Corporation, a manufacturer of food-related thermoformed packaging products based in Shelton, CT,
announced plans to further expand the Company’s capacity across multiple facilities. The expansion reinforces Inline’s commit-ment to growing the business and supporting its customers as demonstrated by the completion of the Company’s plant expansion that added 150,000 square feet to its headquarters this summer. The new plans call for more than $6 million in machinery and tooling. The investment includes a new thermoforming line set to start running in October at the Salt Lake City facility with an-other line to be installed in Inline’s McDonough, GA plant in January. The McDonough facility recently added 42,000 square feet of manufacturing and warehouse space to support these on-going investments. Inline Plastics’s expansion is expected to create 60 new jobs to support the capacity growth.
• October 2013 – During his keynote speech at the Society of Plastics Engineers Thermoforming Conference, Peter Mooney, an economist with Plastics Custom Research Services in Advance, North Carolina, noted that the increase in U.S. consumer spending for durable goods is a positive indicator for the industrial thermoforming industry. Spending on durable goods surpassed non-durables in 2011 and 2012 and Mooney believes spending on durables will continue to outpace non-durables in the near term. Further, Mooney believes there is pent-up demand for durable goods, citing a housing rebound, which he expects to drive sales of appliances and furniture.
Sources: P&M Corporate Finance, Plastics News, Company Reports, PCRS
Transactions by Buyer Type Transactions by End Market
Food and Beverage
Industrial
Consumer
Construction
Medical
Automotive
Transportation
Electronics
Total
14
7
2
2
6
5
2
-
38
2013
11
4
11
2
1
2
-
1
32
2012
U.S.-to-U.S.
U.S.-to-Foreign
Foreign-to-U.S.
Foreign
Total
Distressed
12
5
1
20
38
-
2013
13
2
-
17
32
1
2012
Sector Deal Statistics2012 2013Buyer Type
Flexible Private Equity
(PE)25%
Public Acquirer
31%
PE to PE13%
Private Acquirer
31%
Flexible Private Equity
(PE)24%
PE to PE18%
Public Acquirer
18%
Private Acquirer
40%
Featured Sector Transactions October 2013 – CKF, Inc., a Nova Scotia, Canada-based food packaging specialist, announced its acquisition of thermoformer Vancore Plastic Packaging Ltd. for an undisclosed amount. Vancore manufactures thermoformed clamshells, trays, and blister packs for the fresh produce and other markets. CKF, which traditionally manufactured molded pulp and foam products, views the acquisition of Vancore as an opportunity to capitalize on the trend of increased use of standardized plastic materials while also taking another step toward sustainability by immediately being able to offer PET or rPET packaging to its customers. The acquisition is CKF’s second since acquiring molded pulp supplier Earthcycle Packaging in September.November 2013 – Mason Wells, a Milwaukee, WI-based private equity firm, acquired the rigid medical packaging business of Sealed Air Corp (NYSE:SEE) for approximately $125 million. The division, which will operate as a standalone company under the name Nelipak Healthcare Packaging, manufactures thermoformed trays and blister packs from facilities in Cranston, RI, Venray, Netherlands, and Galway, Ireland. Sealed Air sought to divest the business so it could focus on its core flexible packaging businesses. Mason Wells, which has multiple portfolio holdings in the plastic packaging space, views Nelipak as a platform for growth that will target opportunities on a global scale. The Nelipak division of Sealed Air has sales of approximately $100 million.
0
5
10
15
20
25
30
40
35
21
11
32
20
12
32
22
16
38
18
10
28
17
16
33
13
12
25
Num
ber
of D
eals
Strategic Financial2011 2012 20132008 2009 2010
pmcf.com
M&A Quarterly – Plastics & Packaging
8
Global Blow Molding M&A
Trends in M&A:• Blow molding transactions serving medical end markets increased by two deals in 2013, matching the average level of blow molding
transactions of approximately 22 deals per year since 2008• Foreign investments in blow molders remained flat at 14 deals in 2013 while transactions involving domestic buyers were down
8 deals compared to 2012• Transaction mix among strategic and financial buyers remained flat year over year, with each segment representing 50% of blow
molding deals in both 2012 and 2013
Sources: P&M Corporate Finance, Plastics News, Company Reports
Transactions by Buyer Type Transactions by End Market
Food and Beverage
Industrial
Consumer
Construction
Medical
Automotive
Transportation
Electronics
Total
9
6
3
-
4
-
-
-
22
2013
10
8
9
-
2
1
-
-
30
2012
U.S.-to-U.S.
U.S.-to-Foreign
Foreign-to-U.S.
Foreign
Total
Distressed
6
2
-
14
22
1
2013
12
4
3
11
30
1
2012
Sector Deal Statistics2012 2013Buyer Type
Flexible
Private Equity(PE)47%
Public Acquirer
27%
Private Acquirer
23%
PE to PE 3%
Flexible
Private Equity(PE)36%
Public Acquirer
9%
Private Acquirer
41%
PE to PE14%
Industry News:• November 2013 – The Society of Plastics Engineers Annual Blow Molding Conference held in Atlanta this past October announced
the awards of the conference’s first ever blow molded parts competition. The new competition aims to select blow molded com-ponents that were created over the last two years that demonstrate innovations in design, manufacturing, material application, sustainability, and commercial uses. Winners were selected across 14 packaging and industrial applications, including overall packaging and industrial design awards, food packaging, beverage packaging, pharmaceutical packaging, and other miscella-neous consumer, industrial, and packaging applications.
• December 2013 – The market for blow molding machines in the United States is expected to experience growth according to ma-chinery executives surveyed by Plastics News during the recent K 2013 trade show in Germany. Despite serving a more mature marketplace than those of fast-growing developing nations of Asia and Eastern Europe, buyers of U.S. blow molding machinery are becoming more active as a result of stabilizing PE and PP prices from the shale gas boom. Additionally, new automotive and packaging designs that call for thinner walls in blow molded components have supported the North American market. Key blow molding equipment manufacturers such as Kautex are aiming to take advantage of the improving market for blow molding ma-chinery. Kautex, which is a major player in multi-layer gas tanks for cars, is launching its first move into all-electric blow molding machines in an attempt to take part in the growing packaging market.
Featured Sector Transactions November 2013 – Daniels Scientific, Inc. announced it has agreed to terms to be acquired by Charleston, SC-based Environmental Express, Ltd. for an undisclosed amount. Based in Greenville, SC, Daniels Scientific operates as a manufacturer of blow molded containers and laboratory consumables for environmental testing applications. Daniels Scientific was a subsidiary of Package Supply & Equipment Co. and offers a variety of containers and vials as well as related accessories such as caps. A portfolio company of private equity group Incline Equity, Environmental Express develops, manufactures, and distributes environmental laboratory equipment and consumable supplies for commercial, governmental, industrial, and academic laboratories worldwide.December 2013 – Saddle Brook, NJ-based blow molder Paradigm Packaging was acquired by Scandia Plastics, Inc., a Sheboygan, WI-based portfolio company of private equity group Graham Partners. Paradigm manufactures bottles and jars for vitamin, nu-tritional, over-the-counter drug, and pharmaceutical applications. The acquisition, which transfers Paradigm’s ownership from private equity firm Linsalata Partners to Graham Partners, expands Scandia’s geographical footprint and provides access to new customers in high-growth end markets. Paradigm Packaging has estimated sales of $65 million, according to the most recent blow molding rankings published by Plastics News.
0
5
10
15
20
25
30
30
10
8
18
15
15
30
11
11
22
6
11
17
12
10
22
17
10
27
Num
ber
of D
eals
20122011 20132008 2009 2010Strategic Financial
M&A Quarterly – 2013 Year in Review
PMCF
9
Additional Global Specialty Sector Activity
Trends in M&A:• M&A activity in 2013 involving specialty plastic process types, including rotational molding, foam, pipe & tube, profile extrusion,
and composites experienced declines in year-over-year deal volume, primarily driven by lower industrial end market transactions• Deal volume among specialty processors serving construction and medical end markets increased by 3 deals and 4 deals, respec-
tively, while M&A for specialty processors in transportation markets remained flat• Transaction levels among financial buyers remained strong during 2013, declining by only three deals versus 2012 while strate-
gic activity was down by 23 transactions for the year
KEY TRANSACTIONSPipe & TubeOctober 2013 – Atkore International, Inc., a portfolio company of private equity firm Clayton Dubilier & Rice and a manufacturer of galvanized steel tubes and pipes based in Harvey, IL, took another step toward its plan to become the leader in the conduit PVC market with the announcement of its acquisition of Ridgeline Pipe Manufacturing. Based in Eugene, OR, Ridgeline manu-factures PVC conduit, fittings, elbow, irrigation pressure and sewer/drain pipe products. The acquisition, which is Atkore’s third PVC conduit deal in recent weeks and fifth in two years, will grant Atkore an attractive customer base and market presence in the Northwest, while enhancing the company’s current capabilities.
FoamDecember 2013 – Quanex Building Products Corporation (NYSE:NX) announced its acquisition of the Greenville, Texas plant assets of Atrium Windows and Doors Inc. for an undisclosed amount. Among the assets acquired are six vinyl extrusion lines, which complement the company’s operations in its subsidiary Mikron Industries, a PVC extruder. Quanex views the deal as a key step consistent with the company’s plan to buy vertically integrated customer assets, allowing Quanex to expand its product portfolio to serve the new construction market. The acquisition also provides a strategic location and manufacturing presence in the southern United States. Prior to the acquisition, Atrium signed a long term agreement with Quanex, which will continue to extrude proprietary vinyl profile designs for Atrium.
Profile ExtrusionNovember 2013 – Spring Lake, MI-based Iso-Trude, Inc. has been acquired by Lauren Plastics LLC, a division of Lauren Inter-national Ltd., for an undisclosed amount. Iso-Trude manufactures custom extruded profiles for furniture, point of purchase, automotive, display, consumer, and medical applications. Following the transaction, Lauren Plastics plans to move its opera-tions to Iso-Trude’s 220,000 square foot facility in Spring Lake by early 2014. Iso-Trude’s high-end extrusion capabilities should complement Lauren Plastics’ operations and create sales growth in the plastic profile extrusion space, while also providing additional manufacturing capacity.
November 2013 – Schweitzer-Mauduit International (NYSE:SWM), an Alpharetta, GA-based paper and tobacco products com-pany, announced plans to acquire DelStar, Inc. from private equity group American Capital Ltd. for approximately $230 mil-lion, or 2.1x revenue. DelStar, which is based in Middletown, DE, manufactures extruded netting, cores, composites, and other filtration-related products for healthcare and industrial applications. DelStar has annual sales of approximately $110 million and has been recording sales and EBITDA growth of approximately 10% each year, according to the company. The transaction includes DelStar’s manufacturing facilities in Delaware, Texas, Pennsylvania, California, and China.
November 2013 – Novik, Inc. (TSXV:NVK) announced an agreement to be acquired by Old Greenwich, CT-based private equity group Clearview Capital for approximately $45 million, or 7.9x EBITDA. Novik, based in Quebec City, Canada, is a manufac-turer of polymer products for exterior siding, roof coverings, and building products accessories for the residential and commer-cial construction industries. Clearview will acquire all of the outstanding shares of Novik for 85 cents per share and assume of Novik’s outstanding debt. Clearview plans to partner with management and invest in continued expansion in the Quebec area while further penetrating the United States market.
Source: P&M Corporate Finance, Plastics News, Company Reports
Transactions by Buyer Type Transactions by End Market
Food and Beverage
Industrial
Consumer
Construction
Medical
Automotive
Transportation
Electronics
Total
-
39
10
23
1
4
2
1
80
2012
-
13
5
26
5
1
2
2
54
2013
0
10
20
30
40
50
60
70
90
80
28
32
60 27
53
80
30
24
54
53
19
72
50
28
78
57
29
86
Num
ber
of D
eals
20122011 20132008 2009 2010Strategic Financial
pmcf.com
M&A Quarterly – Plastics & Packaging
10
PMCF Plastics & Packaging Index S&P 500 Index
Note: Chart highlights relative stock price return
Dec- 11 Mar- 12 Jun - 12 Sep-12 Dec-12 Mar- 13 Jun - 13 Sep - 13 Dec-1370%
90%
110%
130%
150%
170%
190%
PMCF Plastics & Packaging Index
PMCF Plastics & Packaging Index Valuation
• The PMCF Plastics & Packaging Index beat the S&P 500 by approximately 1.2% during the fourth quarter of 2013; however, the index outperformed its benchmark by approximately 12.7% on the year
• Publicly traded plastics businesses also continued to experience strong increases in average EV/EBITDA valuations year-over-year after the PMCF Plastics & Packaging Index traded above a median of 8.0x EV/EBITDA for all of 2013 and increased 1.4x since 2012 year end
Revenue MultipleAverageMedian
EBITDA MultipleAverageMedian
0.8x0.7x
6.1x6.0x
Q4 ‘11
0.8x0.8x
7.0x7.2x
0.8x0.8x
6.8x7.1x
Q1 ‘12
0.8x0.8x
7.0x7.2x
Q2 ‘12
0.9x0.8x
7.4x7.3x
Q3 ‘12 Q4 ‘12
1.1x1.1x
9.1x8.6x
1.0x1.0x
8.4x8.2x
Q1 ‘13
1.2x1.2x
9.3x8.7x
Q2 ‘13
1.2x1.1x
9.4x8.7x
Q3 ‘13 Q4 ‘13
U.S. Private Equity Deal Activity
No. of Deals Disclosed Deal Value
Num
ber
of D
eals
0
Dea
l Val
ue ($
in B
illio
ns)
$0$50$100$150$200$250$300$350$400$450$500
2,000 4,000 6,000 8,000
10,000 12,000 14,000 16,000 18,00020,000
12,272
2006
13,012
2007
11,531
2008
10,342
2009
14,315
2010
16,126
2011
18,133
2012 2013
16,542
No. of Deals Disclosed Deal Value
Num
ber
of D
eals
$00
Dea
l Val
ue ($
in B
illio
ns)
2006
2,669
2007
3,175
2008
2,382
2009
1,559
2010
2,177
2011
2,359
2012
2,459
2013
2,124
$200
$400
$600
$800
$1,000
$1,200
$1,400
500
1,000
1,500
2,000
2,500
3,000
3,500
• Middle market M&A activity across all industries during 2013 experienced slight declines in both overall deal volume and deal value compared with record levels experienced in 2012
• Private equity deals also declined in 2013 versus 2012 in terms of total deal volume while the amount of capital invested by financial buyers increased year over year after three consecutive quarters of growth to end the year
U.S. M&A Activity — Deals < $500M
U.S. Middle Market Transaction Summary (All Industries)
Source: Capital IQ, Pitchbook, and PMCF Estimates
Note: Multiples based on most recent data available as of printingSource: Capital IQ
*Includes all disclosed transaction with at least one U.S. party
2013 IndustrialManufacturing/Distribution
Deal of the Year
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This market overview is not an offer to sell or a solicitation of an offer to buy any security. It is not intended to be directed to investors as a basis for making an investment decision. This market overview does not rate or recommend securities of individual companies, nor does it contain sufficient information upon which to make an investment decision.
P&M Corporate Finance, LLC will seek to provide investment banking and/or other services to one or more of the companies mentioned in this market overview.
P&M Corporate Finance, LLC, and/or the analysts who prepared this market update, may own securities of one or more of the companies mentioned in this market overview.
The information provided in this market overview was obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not to be construed as legal, accounting, financial, or investment advice. Information, opinions, and estimates reflect P&M Corporate Finance, LLC’s judgment as of the date of publication and are subject to change without notice. P&M Corporate Finance, LLC undertakes no obligation to notify any recipient of this market overview of any such change.
The charts and graphs used in this market overview have been compiled by P&M Corporate Finance, LLC solely for illustrative purposes. All charts are as of the date of issuance of this market overview, unless otherwise noted.
The PMCF Plastics Index may not be inclusive of all companies in the plastics industry and is not a composite index of the plastic industry sector returns. Index and sector returns are past performance which is not an indicator of future results.
This market overview is not directed to, or intended for distribution to, any person in any jurisdiction where such distribution would be contrary to law or regulation, or which would subject P&M Corporate Finance, LLC to licensing or registration requirements in such jurisdiction.
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