How To Understand The Market For Plastic And Packaging

Transcription

1 PLASTICS & PACKAGING MONITOR FEBRUARY 01 INSIDE THIS ISSUE Select Transactions in Plastics & Packaging Page Plastics & Packaging Equity Valuation Page Plastics & Packaging Transaction Statistics Page JOHN HART 8..8 MATT JAMISON 8..8 RYAN SHUCHMAN Vice President Top News in PLASTICS & PACKAGING February 8, 01 The Association of Postconsumer Plastics Recyclers (APR) and the American Chemistry Council s (ACC) Plastics Division released new data regarding the recycling of rigid plastics indicating significant growth for the sector. The recent success is due in part to the formation of APR s Rigid Plastics Recycling Program in 009, which established an organized effort to target recycling of rigid plastics. Rigid plastics is now the fastest growing category of plastics recycling as the group has worked to establish programs that provide more than 0 Americans with access to rigid plastics collection programs. The research indicates that more than 1 billion pounds of rigid plastics was recycled in 01, which is more than three times the levels achieved in 007. The group hopes to continue on this success and implement new programs to encourage recycling of rigid plastics including nonbottle rigid plastics which have historically been recycled less. February, 01 Tech Molded Plastics, a Meadville, PAbased custom injection molder was named the Plastics News Processor of the Year during the Plastics News Executive Forum held in Florida in February. Tech Molded Plastics won the award, which is sponsored by the Society of the Plastics Industry (SPI), over two other finalists, Riverside, CAbased AMA Plastics, Inc. and Cobourg, Ontariobased Protoplast, Inc. Also during the Executive Forum, Plastics News named three winners of PN Excellence Awards including DLH Industries, Protoplast, and 0/0 Custom Molded Plastics. February 1, 01 Albéa Group, a global cosmetics packaging manufacturer, announced an investment of approximately 0 million euros for two new production facilities in France and Italy. The new facilities will consolidate part of the Company s current operations. The investment includes million euros to merge its tube manufacturing operations in France into a new,000 square foot facility. The tube business accounts for approximately one third of Albéa s 1.1 billion euros in total revenue, and the segment is expected to grow at an annual rate of % according to the Company s President. Albéa will also replace two production facilities in Italy with a new 1,000 square foot facility. The Company reinvested approximately 8%9 its sales in 01 as part of a global investment strategy, which it expects to continue in 01. February 7, 01 Dallas, TXbased market research and consulting firm Marketsand Markets (M&M) released a new report on the global pharmaceutical packaging market which forecasts the segment to reach approximately $78.8 billion by 018. According to the report North America, Europe, and Japan accounted for more than 70 the entire market, which consists of plastic bottles, blister packs, caps and closures, ampoules, vials, and other pharmaceutical packaging products. The United States is the largest consumer of packaging for the segment while growth in the mature market is expected to be slightly less than the global average. The fastest growing market for pharmaceutical packaging is the AsiaPacific region, which includes Japan, and is expected to grow at doubledigit levels on average through 018 to surpass the North American and European markets in total size. In terms of specific pharmaceutical packaging products, plastic bottles and blister packs account for the largest share of the market at approximately.8%; however, nearterm growth for these products will be outpaced by prefillable syringes and inhalers, medication tubes, vials, labels, and accessories. February, 01 According to a report recently released by the Washingtonbased American Chemistry Council, linear low density polyethylene (LLDPE) sales grew approximately.7% in Canada and the United States during 01, accounting for the highest growth rate of the six commodity resins followed by the group. The study also noted polystyrene posted the first positive growth since 011, increasing 1.1% in 01 driven primarily by increased use among consumer, industrial, and food packaging markets. Export sales were even stronger for LDPE and LLDPE in 01, growing 11.8% and 1.0%, respectively, while exports declined significantly among PVC and polypropylene resins. Sources: Plastics News, American Chemistry Council, Association for Postconsumer Plastics Recyclers, Pharmaceutical & Packaging News, MarketsandMarkets, Company Websites

2 John Hart, Plastics & Packaging About PMCF P&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 associates. Our dedicated Plastics & Packaging Group has extensive industry knowledge and covers a wide range of processes including thermoforming, extrusion, blow molding, injection molding, resin, and color & compounding. Offering a depth 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 and Acquisitions Sales and Divestitures Capital Raising Strategic Assessments Sale Planning Matt Jamison CHICAGO W. Washington St., Suite 700 Chicago, IL DETROIT 00 Northwestern Highway, Suite Southfield, MI 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.

3 Plastics & Packaging Monitor February 01 Select Transactions in Plastics & Packaging Date Buyer Target Industry/ Application Enterprise Value ($mm) EV/EBITDA Injection Molding Dec1 9Dec1 9Dec1 1Dec1 Jan1 Jan1 Feb1 Feb1 Feb1 Feb1 7Feb1 8Feb1 SaintGobain Performance Plastics Corporation Florida Capital Partners, Inc.; PNC RiverArch Capital RPC Group PLC Weener Plastik AG Berry Plastics Group, Inc. (NYSE:BERY) RTI International Metals, Inc. (NYSE:RTI) Montagu Private Equity LLP Gardner Denver Inc. ResTech Corporation ContiTech AG Mattel, Inc. (NasdaqGS:MAT) Mayhew Steel Products, Inc. LS Kunststofftechnologie GmbH Custom Molded Products, Inc. Helioplast doo Weener Empire Plastics India Joint Venture QINGDAO P&B Co., Ltd. RTI Directed Manufacturing, Inc. Rexam's Pharma Devices & Prescription Retail Pkg. Division Conroe Plastics Molding, Inc. Northeast Mold & Plastics, Inc. Veyance Technologies, Inc. MEGA Brands Inc. (TSX:MB) Basque Plastics, LLC Automotive Automotive Electronics Automotive x Blow Molding 1Dec1 19Dec1 8Jan1 Jan1 Feb1 1Feb1 RPC Group plc (LSE:RPC) Scandia Plastics, Inc. Logoplaste Consultores Tecnico Céréa Partenaire; CHEMARK Kft.; BPI France SA Plastipak Packaging, Inc. Robinson plc (AIM:RBN) Maynard & Harris Group Limited Paradigm Packaging, Inc. Seda de BarcelonaPackaging Chesapeake's Specialty Chemical Packaging Division Constar International LLC MADROX Spolka Jawna x Resin and Color & Compounding 9Dec1 1Dec1 17Dec1 0Dec1 1Dec1 Jan1 1Jan1 8Jan1 1Jan1 Feb1 1Feb1 19Feb1 Citadel Plastics Holdings, Inc. OpenGate Capital, LLC Braskem S.A. (BOVESPA:BRKM) OpenGate Capital, LLC A. Schulman, Inc. (NasdaqGS:SHLM) Capiton AG Solvay America, Inc. Kraton Performance Polymers Teknor Apex Company Capital Partners, Inc. Ravago Petrokimya Uretim A.S. Uniform Color Company, Inc. Lucent Polymers, Inc. Solvay Benvic Europe Iberica, S.A. Solvay Indupa S.A.I.C. (BASE:INDU) Kem One Prime Colorants Inc. Dynea Erkner GmbH Plextronics, Inc. LCY ChemicalStyrenic Block Viking Polymers, LLC East Coast Colorants, LLC Tekpol Teknik Poliuretan San. Ve TIC. A.S. BASF SE, Liquid Masterbatch Business in Clermont de l'oise Electronics x Film 11Dec1 Dec1 1Jan1 1Jan1 1Feb1 Scholle Packaging, Inc. Pall Corporation (NYSE:PLL) The InterFlex Group, Inc. CCL Industries Inc. (TSX:CCL.B) ProPac Packaging (Aust) Pty Ltd. IPN Europe BV Atmi LifeSciences Star Packaging Corporation Sancoa and TubeDec Australian Film Manufacturers Pty Ltd x Sheet & Thermoforming 1Dec1 8Jan1 Feb1 7Feb1 Universal Plastics Corporation SIMO AMERICA Inc. EQT Partners AB Lippert Components, Inc. Mayfield Plastics, Inc. Laminations Inc. Færch Plast A/S Star Design, LLC Transportation 1. Specialty Processes (Rotomolding, Form, Profile Extrusion, & Other) 1Dec1 Jan1 Jan1 Jan1 1Feb1 17Feb1 19Feb1 Feb1 Feb1 D Systems Corp. (NYSE:DDD) Mitsui Matsushima Co., Ltd. (TSE:118) Grey Mountain Partners, LLC Continental Commercial Products, L.L.C. Indiana Rotomolding Inc. WERU GmbH Rototek Liimted Masonite International Corporation (NYSE:DOOR) KP Building Products, Inc. Village Plastics, Inc. NIPPON STRAW Co., Ltd. Dimex LLC FTW Holdings, Inc. El Monte Plastics LLC. UNILUX AG Imagenta Moulding Plc, Rotational Moulding Business DoorStop International Ltd Farley Group Inc. Transportation Construction Construction Construction Source: CapIQ, Company Reports Featured Transaction Marquee Deal February, 01 Montagu Private Equity, a Londonbased investment firm, announced it has acquired the Pharmaceutical Devices and Prescription Retail Packaging operations from Rexam plc s Healthcare Division for approximately $80 million. The sale, which accounts for two thirds of Rexam s Healthcare Division, does not include the healthcare closures and containers operations. Rexam has been in discussions to sell its Healthcare operations for the past year as the company aims to focus on its cans business. Upon completion of the deal, Rexam shareholders will receive approximately 0 million through a redeemable B share scheme along with a share consolidation. Montagu Private Equity has experience dealing with Rexam and in operating medical and healthcare companies, having previously owned Risdon Pharma, which it sold to Rexam in 00. Featured Transaction Marquee Deal February, 01 Plymouth, MIbased Plastipak Packaging, Inc. announced it has reached an agreement to acquire the U.S. assets of Constar International Holdings, LLC for $. million after a bidding war following the Company s December bankruptcy filing. Constar, based in Trevose, PA, filed for Chapter 11 bankruptcy protection from creditors in December 01 and received a stalking horse bid from Amcor, Ltd., an Australian packaging company with a North American headquarters based in Ann Arbor, MI. Amcor is North America s largest blow molder according to the most recent Plastics News data. Plastipak, which ranked third among North American blow molders prior to the transaction, has sales of $1. billion across 1 plants. The Constar U.S. assets include six plants and approximately $190 million in annual sales. P&M Corporate Finance, LLC

4 Plastics & Packaging Monitor February 01 Plastics & Packaging Equity Valuation Company Name Symbol LTM Revenue Financials / Metrics ($mm) (/8/01) LTM EBITDA Market Cap Price/ Earnings Current EV / EBITDA Multiples Year Average Projected Next FYE^ Large Packaging (Large) Amcor Ltd. AptarGroup, Inc. Avery Dennison Corp. Bemis Co. Inc. Berry Plastics Group Rexam plc Sealed Air Corp. Silgan Holdings Inc. Sonoco Products Co. Large Average ASX:AMC NYSE:ATR NYSE:AVY NYSE:BMS NYSE:BERY LSE:REX NYSE:SEE NasdaqGS:SLGN NYSE:SON $11,70,0,,00,71, 7,91,709,88 $,87 $1, , $ 79 $,901,,78,99,87,08 7,90,07,80 $, 1.x 0.x 19.x 0.x 1.x 77.x 1.8x 19.8x 8.x.x.x 8.7x 8.x 8.8x 9.x.x 9.1x 9.x.x 7.x 7.x 8.x 8.8x 7.x 8.x 9.9x 8.x 9.x 8.x 9.0x MidSize Packaging (Mid) AEP Industries Inc. CCL Industries, Inc. MultiColor Corp. RPC Group plc Tredegar Corp. Winpak, Ltd. MidSize Average NasdaqGS:AEPI TSX:CCL.B NasdaqGS:LABL LSE:RPC NYSE:TG TSX:WPK $1,19 1, , $1,17 $ $ 11 $9,8 1,7 80 1,0 $1,78.x 0.x 1.x.x.0x.x 7.x.7x.1x.7x 9.x 8.0x 7.1x 7.9x 7.x 7.x 7.7x.x 9.9x.x Color & Compounders (C&C) A. Schulman, Inc. Clariant AG Cytec Industries, Inc. Ferro Corp. PolyOne Corp. C&C Average NasdaqGS:SHLM SWX:CLN NYSE:CYT NYSE:FOE NYSE:POL $,187,8 1,9 1,,771 $,70 $ $99 $1,01,19,78 1,18, $, 0.x NM NM 1.x 8.7x 9.0x 8.x.0x 7.0x.0x 7.x.x 8.8x 8.x.x 9.x Diversified and Plastics (Diversified) Axiall Corporation NYSE:AXLL Core Molding Technologies, Inc. AMEX:CMT Essentra plc LSE:ESNT Intertape Polymer Group, Inc. TSX:ITP Jarden Corp. NYSE:JAH Myers Industries, Inc. NYSE:MYE Plastic Omnium SA ENXTPA:POM Simona AG DB:SIM Diversified Average $, 1 1, 78 7, 8,79 70 $,7 $ $ $,80 1, ,907 78,078 $, 1.x 1.0x.x.x.7x 8.x 1.0x 0.8x.8x.1x 7.x 1.x 9.x 1.x 8.x 8.7x.x 9.x.x 11.x 9.x 7.x.x.8x 7.x.x 1.7x.x 7.x.9x 8.7x Income Statement data as of last period date reported. Currency conversion rate as of /8/01 Performance of PMCF Indices vs. S&P 00 PMCF Key Takeaways and Analysis 00% Large Mid C&C Diversified S&P 00 The Diversified component is now leading the PMCF Index, trading at 9.x EBITDA, having increased by a half turn over the past month 0% 00% The Color & Compounding component of the Index was the only segment to decline versus levels in January, falling from.x to EBITDA. The decline was driven by Ferro Corp., which decreased significantly from a heightened valuation in January while the rest of the sector increased in value % 0% 0% Feb11 May11 Aug11 Nov11 Feb1 May1 Aug1 Nov1 Feb1 May1 Aug1 Nov1 Feb1 The MidSized, Color & Compounding, and Diversified components of the PMCF Index each outperformed the S&P 00 during the three month period ending February 8th. The Diversified component experienced the strongest growth during February, increasing by approximately.1%. Source: Capital IQ ^Based on available Capital IQ Analyst summaries

5 Plastics & Packaging Monitor February 01 Plastics & Packaging Transaction Statistics Plastics & Packaging Transactions (Dec 1 Feb 1) Transactions by End Market Strategic 1,011 Financial Addon Financial Platform Dec 1 Jan 1 Feb 1 Mar 1 Apr 1 May 1 Jun 1 Jul 1 Aug 1 Sep 1 Oct 1 Nov Dec 1 Jan 1 Feb 1 Transactions by Process Type Dec 1 Feb 1 Dec 1 Feb 1 Specialty % Sheet & Thermoforming 7% Resin/Color & Compounding 18% Blow Molding 7% Film 17% Packaging Detail Rigid Packaging Flexible Packaging Bottles Injection Molding 9% Packaging Transaction Detail Dec 1 Feb 1 1.0% 0.0% 8.0% 0% Distressed Transaction Detail Dec 1 Feb 1 Blow Molding 11% Specialty 17% Sheet & Thermoforming % Resin/Color & Compounding 7% Dec 1 Feb 1 Dec 1 Feb Film 8% Distressed 1 1.0%.% Injection Molding % 8.%.9% 0.8% 0% PMCF Key Takeaways & Analysis Transaction volume for the Plastics and Packaging industry from December 01 through February 01 was characterized by the following trends as compared to December 01 to February 01: Overall plastics and packaging transaction volume for the three month period was slightly lower by two transactions as deal flow rebounded from weaker January M&A activity with a strong month in February Deals involving plastics and packaging suppliers to the food & beverage, automotive, and transportation end markets each increased versus the comparison period, while electronics and consumer transactions each remained flat year over year Transaction mix among strategic and financial buyers shifted as strategic buyers were more active from December 01 through February 01, increasing by deals to transactions, and 9 deal volume versus % in the comparison period Overall packaging M&A activity was slightly higher from December 01 to February 01, increasing by 1 transaction versus the comparison period. Bottle packaging M&A supported the growth with an increase of transactions. Packaging deals accounted for approximately 8 plastics and packaging deals, slightly higher than the % experienced in the comparison period Resin and color & compounding transactions posted the largest increase in total deal activity by processor type, growing by 8 deals versus the comparison period, while blow molding and injection molding deals also increased Distressed transactions experienced an increase in deal volume, increasing by deals compared to the previous period, despite only one distressed deal during the month of February Source: P&M Corporate Finance

6 PLASTICS & PACKAGING TRANSACTION UPDATE PMCF ANNOUNCES SALE OF FORT WAYNE PLASTICS INC. TO KATY INDUSTRIES INC. P&M Corporate Finance (PMCF) is pleased to announce that it served as the exclusive financial advisor to private equity investors Ferro Management Group, Inc. (Ferro) in the sale of its portfolio company Fort Wayne Plastics Inc. (FWP) of Fort Wayne, Indiana. The buyer was Katy Industries Inc. (Katy (OTCPK: KATY)), a leading designer, manufacturer and distributor of sanitary maintenance supplies, professional cleaning products and consumer products. The acquisition blends the extensive technical expertise of FWP with the wellestablished brand name and market leading position of Katy, and its subsidiary Continental Commercial Products. Specifically, the combination supports Katy s strategy of expanding its structural plastic manufacturing capabilities. Katy is a portfolio company of private equity firm Kohlberg and Company. With a history that spans over 0 years, FWP is a significant player within the structural plastic space and specializes in the manufacture of medium to large sized molded plastic components, utilizing low pressure, multinozzle structural plastic and gas assist technologies in its manufacturing process. FWP s diverse capabilities, additive secondary offerings and fullservice approach established its leading position to a customer base that requires engineered components and assemblies for applications in water filtration, agriculture, recreation, medical, automotive, building products and a variety of other end markets. The sale of Fort Wayne Plastics to Katy was the ideal scenario for Ferro Management Group, said Markus Isenrich, Ferro s founder and President. Our investors are thrilled with the outcome of this transaction. We are proud to have played a small part in the storied history of Fort Wayne Plastics and are confident the company will continue to thrive under new ownership. Ferro hired PMCF to lead the sale process for the FWP. Mr. Isenrich noted, PMCF was critical to the success of this transaction. They understood the business and plastics market dynamics and effectively communicated the right story to ensure a successful outcome for Ferro and FWP. Their consultation and investment banking expertise was instrumental in completing this transaction. I would highly recommend the PMCF team. The transaction closed on February 19, 01. PMCF ANNOUNCES RECAPITALIZATION OF PLASTIC MEDICAL MANUFACTURER COMAR P&M Corporate Finance (PMCF) is pleased to announce that it served as the exclusive financial advisor to Comar, Inc. (Comar), of Buena, NJ in a successful recapitalization with Graham Partners (Graham) of Newtown Square, PA. The transaction, and Graham s partnership with Comar s management, will provide access to additional capital and resources to support Comar s global expansion plans and further broaden the Company s product development and manufacturing capabilities in North America. Comar s shareholders selected PMCF s Plastics & Packaging Group, led by John Hart, to serve as financial advisor for the recapitalization. Comar President Mike Ruggieri noted, PMCF was instrumental to the success of this transaction. They have been a trusted and committed advisor to Comar for over years. We relied on John and his team to execute our successful acquisition strategy and knew they were the right choice when we sought to bring in a financial partner. They are clearly plastic and packaging industry experts and guided us through every step of the transaction process. We would highly recommend PMCF to other companies considering an acquisition or sale. PMCF is continuing to assist the Company in pursuing acquisition candidates in North America and Europe. For more information visit JOHN D. HART 8..8 john.hart@pmcf.com JAMES R. PETERSEN Associate james.petersen@pmcf.com RYAN R. SHUCHMAN Vice President ryan.shuchman@pmcf.com DANIEL M. RATLIFF Analyst dan.ratliff@pmcf.com MATTHEW G. JAMISON 8..8 matt.jamison@pmcf.com SCOTT S. ROHLIG Analyst scott.rohlig@pmcf.com