Second quarter 2016
Packaging Recap
Delayed but not stagnated! It is clear that the uncertain environment caused by the Brexit vote, the US elections and slowing growth in China affected global M&A activity during the first half of 2016. Given these situations — and in some cases their concrete impact on financial markets — firms and boardrooms became more cautious and postponed or cancelled deals. Financial uncertainty, along with heightened scrutiny and oversight, led to the cancellation of approximately 100 deals, which is the largest number of failed transactions since the financial crisis of 2008. And we witnessed 5% and 19% decreases in worldwide deal volume and value, respectively, compared to the first half of 2015. That being said, we saw a record level of Chinese cross-border transactions worth US$141 billion in the first half of 2016, a 66% increase over the same period last year. And during the second quarter of 2016, total deals announced worldwide amounted to US$949 billion, an increase of 35% over the first quarter of 2016. This indicates that the deal drivers that
fuelled last year’s record-high M&A are still in place and will likely continue to support deal making for the remainder of this year. M&A activity for the United States was also affected by uncertainty, with transactions totalling US$709 billion, a decrease of 20% compared to the first half of 2015. Despite the slowdown, announced deals in the United States for the second quarter of 2016 were up almost 80% over the first quarter, for a total of US$463 billion. Based on our 14th Global Capital Confidence Barometer survey, US executives still have a strong appetite for M&A as they redefine their growth strategies to cope with muted macro growth and strong competitive disruption. The survey also reveals that 50% of US executives are keeping acquisitions as top boardroom priorities. The results of our latest survey also seem to apply to the global packaging M&A market, which was very active during the second quarter of the year. The quarter’s highlights are the US$2.4 billion acquisition of BWAY Parent Company Inc. by Stone Canyon
Industries and the US$3.4 billion acquisition of certain assets of Ball Corporation by Ardagh Group S.A. Also noteworthy are the three transactions announced by Australiabased Amcor Limited, two of which were in Chile and included the closing of the US$435 million acquisition of Chile-based Alusa S.A. Following 2015’s all-time record deal value and the financial uncertainty that paused transactions in the first quarter of 2016, executives are now transacting at a steady pace. According to our latest Global Capital Confidence Barometer, companies have digested the reality of modest or stable economic growth, and M&A will be driven by a set of very strategic imperatives. In the shorter term, the results of the Brexit vote and its impact on the foreign exchange and equity markets could cause a delay in M&A activity, but transaction levels are expected to rise over the rest of the year, driven by companies with a generally sustained level of relatively easy access to inexpensive capital seeking strategic opportunities.
Transactions in brief* Flexible
••Australia-based Amcor Limited (ASX:AMC)
acquired Chile-based Alusa S.A. from Tech Pack S.A. and Nexus Private Equity for US$435 million. The transaction represents 8.5x the company’s latest annual EBITDA of approximately US$51 million. Alusa S.A. is the largest flexible packaging business in South America, with plants in Chile, Peru, Colombia and Argentina. With this acquisition, Amcor Limited improves its customer value proposition in the flexible packaging marketplace by leveraging Alusa S.A.’s presence in South America. ••UK-based RPC Group PLC (LSE:RPC) agreed to acquire British Polythene Industries PLC (LSE:BPI), also of the United Kingdom, for a total consideration of £260 million (US$425 million). British Polythene Industries PLC produces polythene films for the food packaging industry, as well as agricultural, horticultural, industrial and consumer products. The company is also one of the largest recyclers of waste polythene film in Europe. This acquisition will allow RPC Group PLC to pursue opportunities in the flexible packaging market. ••Canada-based Transcontinental Inc. (TSX:TCL.A) acquired US-based Robbie Manufacturing Inc., which specializes in on-site packaging needs for grocery stores, shrink wrap packaging of multipack consumer goods, and packaging solutions for food processors. This acquisition allows Transcontinental Inc. to enter new packaging niches while generating synergies. Terms of the transaction were not disclosed. ••US-based Oliver Products Company acquired Mangar Industries Inc., also of the United States, which develops and manufactures sterile barrier packaging products for medical device manufacturers. Terms of the transaction were not disclosed. ••US-based Smyth Companies LLC acquired Flexible Container Systems LLC, also of the United States, which manufactures flexible plastic tubes for the North American health and beauty aids marketplace. This transaction broadens Smyth Companies LLC’s product offering. Terms of the transaction were not disclosed. ••South Africa-based K2015310081 Proprietary Limited agreed to acquire Tuffy Brands (Pty) Ltd, also of South Africa, which manufactures flexible plastic and paper products for retail, industrial, advertising, and marketing industries in South Africa. Terms of the transaction were not disclosed. ••Austria-based Constantia Flexibles AG agreed to acquire Vietnam-based Oai Hung Co., Ltd, which manufactures aluminum blister foils, rigid films and various packaging solutions for the pharmaceutical market. This transaction will allow Constantia to benefit from a pharmaceutical production site in Asia and to further expand in the Southeast Asia region. Terms of the transaction were not disclosed. ••France-based Nutripack S.A.S., a subsidiary of Proplast Group, acquired Plastiques RG and PRG from GPack Group, also of France. Plastiques RG and PRG manufacture packaging products for the food industry. This transaction broadens Nutripack S.A.S.’s product offering. Terms of the transaction were not disclosed. ••Australian-based Amcor Limited (ASX:AMC), agreed to acquire 50% stake in Columbia-based Empaques Flexa S.A.S. and Peru-based PeruPlast S.A. from Nexus Private Equity for a total of US$5 million. Empaques Flexa S.A.S. and PeruPlast S.A. manufacture flexible packaging products in South America.
••US-based Novolex acquired Heritage Bag
Company Inc., also of the United States, which is a manufacturer of plastic can liners and other packaging products. The transaction will complement Novolex’s product portfolio. Terms of the transaction were not disclosed.
Rigid
••Australia-based Amcor Limited (ASX:AMC)
acquired Canada-based Plastic Moulders Limited for C$38 million (US$30 million). Plastic Moulders Limited is a rigid plastics business that manufactures containers and closures for the food and personal care markets in North America. With this acquisition, Amcor broadens its product offering and pursues opportunities in market segments that are outside traditional non-alcoholic beverage markets. ••US-based N.E.W. Plastics Corp. acquired Fulcrum Container LLC, also of the United States, which offers plastic containers and other products. With this acquisition, N.E.W. Plastics Corp expands its services and geographic reach. Terms of the transaction were not disclosed. ••South Africa-based IEP Portfolio 1 Limited acquired Boxmore Plastics International (Pty) Ltd., also of South-Africa, which manufactures plastic containers for the beverage market in South Africa and the Indian Ocean islands. Terms of the transaction were not disclosed. ••Italy-based Aksìa Group SGR S.p.A. acquired Lameplast S.p.A., also of Italy, which provides integrated services for the manufacturing, filling, and packaging of pharmaceutical products, medical devices, and cosmetics. Terms of the transaction were not disclosed. ••Spain-based Quadpack Spain SL acquired Rinaplast S.A., also of Spain, which manufactures various types of containers for the cosmetic industry. Terms of the transaction were not disclosed. ••US-based TricorBraun Inc. acquired The Packaging Design Group Inc., also of the United States, which provides packaging solutions for the pharmaceutical, personal care, and food and beverage industries. With this transaction, TricoBraun Inc. benefits from The Packaging Design Group’s presence in the UK to further expand in Europe. Terms of the transaction were not disclosed. ••Switzerland-based Tetra Pak International S.A. acquired Netherlands-based Laude cheese moulds BV, a manufacturer of plastic moulds used in hard and semi-hard cheese production. This transaction broadens Tetra Pak International S.A.’s product offering in the cheese industry. Terms of the transaction were not disclosed. ••Germany-based FM Plast GmbH acquired AWS Spritzgießtechnik Wüllner GmbH, also of Germany, which manufactures plastic caps for the domestic packaging industry. Terms of the transaction were not disclosed. ••US-based OpenGate Capital acquired Italy‑based Alfatherm SpA., which is the fourth largest rigid, semi-rigid and flexible PVC films manufacturer in Europe. Terms of the transaction were not disclosed.
Glass
••India-based Borosil Glass Works Limited
(BSE:502219) agreed to acquire a 60.3% stake in Klass Pack Pvt. Ltd, also of India, which offers glass ampoules and tubular glass vials for pharmaceutical companies. Terms of the transactions were not disclosed.
Paper
••US-based International Paper Company
(NYSE:IP), agreed to acquire the assets of Weyerhaeuser NR Company, also of the United States, for a total consideration of US$2.2 billion. Weyerhaeuser NR Company operates five pulp mills and two converting facilities that produce fluff pulp, softwood pulp, and specialty pulp for a number of consumer applications. With this acquisition, International Paper Company expects to realize a tax benefit of approximately of US$300 million and annual synergies of US$175 million. ••Finland-based Huhtamaki Oyj (HLSE:HUH1V) acquired UK-based Delta Print And Packaging Limited for £80 million (US$117 million). Delta Print And Packaging Limited is specialized in bespoke printed folding carton packaging for the UK and European foodservice, packaged food and retail markets. With this acquisition, Huhtamaki Oyj continues to implement its growth strategy by entering the folding carton packaging market in Europe. ••Japan-based Rengo Co. Ltd. (TSE:3941) agreed to acquire US-based Tri-Wall Holdings Limited from Tri-Wall Asia Limited, CITIC Capital Partners and two individuals for ¥24.8 billion (US$227 million). Tri‑Wall Holdings Limited manufactures and markets proprietary triplewall and double‑wall corrugated packaging solutions. This transaction will enhance Rengo Co. Ltd.’s product offering in the corrugated packaging business. ••UK-based Macfarlane Group PLC (LSE:MACF) acquired Edward McNeil Limited, also of the United Kingdom, for a total consideration of £1.8 million (US$2.8 million). Edward McNeil Limited is a regional distributor of protective packaging materials. This transaction strengthens Macfarlane Group PLC’s presence in Scotland. ••UK-based Macfarlane Group PLC (LSE:MACF) acquired Colton Packaging Teesside Limited, also of the United Kingdom, for a total consideration of £1.25 million (US$1.7 million). Colton Packaging Teesside Limited is an established distributor of protective packaging materials. This transaction strengthens Macfarlane Group PLC’s presence in the northeast of England. ••France-based Prosentos acquired RCI-AGCLuxe S.A., also of France, which manufactures cardboard packaging products for various industries. Terms of the transaction were not disclosed. ••UK-based DS Smith PLC (LSE:SMDS) agreed to acquire Portugal-based Gopaca - Fábrica de Papel e Cartão, S.A., which manufactures corrugated packaging products. This transaction will allow DS Smith PLC to increase its product offering to its pan-European customers. Terms of the transaction were not disclosed. ••US-based Georgia-Pacific LLC acquired Reliable Container Inc., also of the United States, which offers a variety of custom corrugated containers and point-of-purchase displays. With this transaction, Georgia-Pacific LLC expands its capabilities and geographic reach in the Southern California and Baja region. Terms of the transactions were not disclosed. ••Germany-based Aurelius SE & Co. KGaA (XTRA:AR4) acquired the commercial activities of Abelan Board Industrial, S.L, also of Germany, which manufactures cardboard packaging products. Terms of the transaction were not disclosed.
* Sources: S&P Capital IQ, Thomson ONE, company press releases and other publicly available information.
2 | Packaging Recap Second quarter 2016
Ernst & Young Orenda two-year global packaging index
The Ernst & Young Orenda Corporate Finance global packaging index tracks the performance of the most widely traded global packaging companies relative to the benchmark S&P 500 composite index.
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Note: The indices in this newsletter have been compiled by Ernst & Young Orenda Corporate Finance Inc. solely for illustrative purposes. The companies chosen are publicly traded companies that are commonly used for industry composites to show stock performances within a sector. The indices do not include all public companies that could be categorized within each sector and were not created as benchmarks, nor should they imply benchmarking or recommendations for a particular stock or sector. Charts: Ernst & Young Orenda Corporate Finance Inc. Data sources: Bloomberg, Capital IQ
AEP Industries Inc. Amcor Limited AptarGroup, Inc. Astrapak Ltd. Avery Dennison Corporation Ball Corporation Bemis Company, Inc. Berry Plastics Group, Inc. BillerudKorsnäs Aktiebolag (publ) British Polythene Industries plc Cascades, Inc. CCL Industries Inc. Chuo Kagaku Co., Ltd. Crown Holdings Inc. DS Smith Plc Duni AB (publ) Essel Propack Limited FP Corporation Fuji Seal International, Inc. Gerresheimer AG Graphic Packaging Holding Company Greif, Inc. Groupe Guillin SA Hokkan Holdings Limited Huhtamaki Oyj International Paper Company Lee & Man Paper Manufacturing Limited Mayr-Melnhof Karton AG MeadWestvaco Corporation Metsa Board Oyj Mondi Limited Mpact Limited Multi-Color Corp. Myers Industries Inc. Nampak Limited Nine Dragons Paper (Holdings) Ltd. Orora Limited Owens-Illinois, Inc. The Pack Corporation Packaging Corporation of America Pact Group Holdings Limited Papeles y Cartones de Europa S.A. Rengo Co. Ltd. Reno de Medici SpA Rexam plc Rock-Tenn Company RPC Group plc Sealed Air Corporation Silgan Holdings Inc. Smurfit Kappa Group plc Sonoco Products Co. Taiwan Hon Chuan Enterprise Co., Ltd. Toyo Seikan Group Holdings, Ltd. Uflex Limited Vetropack Holding AG Vidrala SA Winpak Ltd.
Packaging Recap Second quarter 2016 | 3
••Canada-based Norampac Inc., a subsidiary of Cascades Inc. (TSX:CAS),
completed a transaction with US-based Rand-Whitney Container LLC for the acquisition of its corrugated packaging plant in Newtown, Connecticut. Rand-Whitney Container LLC designs and produces corrugated shipping cases, consumer packaging products, merchandising displays, and corrugated die-cuts and inserts. This acquisition strengthens Norampac Inc.’s position in the Northeastern United States. Terms of the transaction was not disclosed. ••Japan-based Dynapac Co., Ltd (TSE:3947) agreed to acquire the paper packaging business from Crown Paper Industry Co and Nakano Paper Trading Co., also of Japan. Crown Paper Industry Co., Ltd. manufactures paperboard cartons, bags, and other related products. Terms of the transaction were not disclosed. ••Mexico-based Gondi, S.A. de C.V. agreed to acquire Aluprint Plegadizos S. de R.L. de C.V., also of Mexico, from Constantia Flexibles AG. Aluprint Plegadizos S. de R.L. de C.V. manufactures folding cartons and graphics micro-corrugated boxes for the fast moving consumer goods industry. Terms of the transaction were not disclosed. ••Russia-based ILIM Group (RTS:ILIM) acquired a corrugated packaging plant from Gofra Manufacturing Group LLC, also of Russia, which manufactures and supplies corrugated packaging products for the food, chemical, construction, furniture, and other industries. This transaction allows ILIM Group to double its production capacity. Terms of the transaction were not disclosed. ••Spain-based Graficas Maculart, S.A. acquired L’Estoig Farmaceutic S.L., also of Spain, which manufactures paper packaging products for the pharmaceutical industry. Terms of the transaction were not disclosed. ••Italy-based Pro-gest S.p.A. acquired Ondulati Giusti and Cartonificio Fiorentino, also of Italy. Ondulati Giusti and Cartonificio Fiorentino manufacture containerboards, corrugated cardboard, and other packaging solutions. This transaction allows Pro-gest S.p.A. to integrate its supply chain from pulp to packaging. Terms of the transaction were not disclosed. ••Russia-based SFT Group acquired Molokovo Cardboard Printing Factory, also of Russia, which manufactures packaging materials from cardboard, paper, and micro corrugated board. Terms of the transaction were not disclosed. ••UK-based Mondi Limited (JSE:MND) and Mondi PLC (LSE:MNDI) agreed to acquire 90% of Turkey-based Kale Nobel Ambalaj Sanayi ve Ticaret Anonim Sirketi from Argus Capital Partners and M. Olcay Hephiz for a total consideration of €90 million (US$100 million). Kale Nobel Ambalaj Sanayi ve Ticaret Anonim Sirketi is a consumer packaging company focused on the manufacture of paper and flexible consumer packaging for ice cream and other applications as well as aseptic cartons. This transaction will allow Mondi Limited to support the growth of its consumer packaging business by broadening its product offer. ••UK-based CVC Capital Partners Ltd. agreed to acquire Sweden-based ÅR Packaging Group AB from Accent Equity Partners AB. ÅR Packaging Group AB is one of Europe’s leading paper and flexible packaging companies with sales of approximately €560 million. Terms of the transaction were not disclosed.
Metal
••Luxembourg-based Ardagh Group S.A. acquired select metal beverage
can assets from US-based Ball Corporation (NYSE:BLL) for a total consideration of US$3.4 billion, while assuming US$200 million in debt. The transaction represents 7x the standalone annual EBITDA including anticipated costs and synergies. These assets had 2015 sales of US$3 billion and standalone EBITDA of US$400 million. Ball Corporation supplies metal packaging products to the beverage, food, personal care, and household industries worldwide. With this acquisition, Ardagh Group S.A. expands its consumer packaging business in the beverage can market while complementing its existing metal and glass businesses. ••China-based Suzhou Jiudeqi Electronic Technology Co., Ltd agreed to acquire a 90% stake in Suzhou Xinnan Package Products Co., Ltd., also from China, from Sanritsu Corporation (TSE:9366). Terms of the transaction were not disclosed. ••US-based Stone Canyon Industries agreed to acquire BWAY Parent Company Inc, also of the United States, from Platinum Equity LLC for a total consideration of US$2.4 billion. BWAY Parent Company Inc. is a North American manufacturer of rigid metal and plastic containers used to package industrial, bulk food and retail goods. ••Japan-based Toyo Seikan Group Holdings, Ltd. (TSE:5901) signed a memorandum of understanding to acquire Hokkan Holdings Limited (TSE:5902), also of Japan. Hokkan Holdings Limited manufactures various types of containers for the food and beverage industry. The merger is expected to take place in April 2017 via a share exchange.
Our Plastics and Packaging team Our team is part of a global network of professionals that combines an in-depth understanding of the industry’s dynamics and key players with the ability to provide a variety of transaction services. Ken Brooks +1 514 874 4412
[email protected] Bernard Cormier +1 514 874 4305
[email protected]
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ey.com * Sources: S&P Capital IQ, Thomson ONE, company press releases and other publicly available information.
