a mergers and acquisitions review august …august 2004 4 | corrugated containers: a mergers and...

M E R G E R S & A C Q U I S I T I O N S

Douglas J. LawsonVice President312 [email protected]

Chad E. BellAssociate312 [email protected]

Andrew H. SchwartzAnalyst312 [email protected]

CORRUGATED CONTAINERS

A M E R G E R S A N D A C Q U I S I T I O N S R E V I E W

A U G U S T 2 0 0 4

August 2004

Piper Jaffray M&A Insights Corrugated Containers: A Mergers and Acquisitions Review | 1

T A B L E O F C O N T E N T S

Part I Executive Summary ............................................................................ 2

Part II Overview ........................................................................................... 4

Part III Industry Characteristics ...................................................................... 7

Part IV Competitors ..................................................................................... 13

Part V Performance Metrics ........................................................................ 20

Part VI Mergers & Acquisitions Activity ....................................................... 22

Part VII Public Company Valuations .............................................................. 25

Appendix A Additional Information on Select Companies ..................................... 26

August 2004

2 | Corrugated Containers: A Mergers and Acquisitions Review �Piper Jaffray M&A Insights

Growth Drivers The corrugated container market is a slow growth market, with domestic growthprojected at approximately 3% annually through 2007. Factors affecting the level ofgrowth include: (i) the state of the economy, (ii) offshore competition and (iii) competingproducts. Historically, corrugated container demand has moved with changes in GDP;however, more recently corrugated container demand has been more closely associatedwith nondurable goods production. After three years of declining sales, we expect thecorrugated container industry to benefit from the rebound in the economy. Corrugatedcontainer demand has been affected both by the movement of manufacturing offshore(e.g., to China) and increased offshore corrugated container capacity. Corrugatedcontainers have experienced some competition from competing products such as stretchand shrink wrap, reusable plastic containers and intermediate bulk containers.

P A R T I : E X E C U T I V E S U M M A R Y

The domestic corrugated container market is a $22 billion segment of the overall packagingindustry. In this report, we provide an overview of the corrugated container market,including industry characteristics, end markets and major participants. In addition, wereview mergers and acquisitions value drivers, transaction activity and performance andvaluation metrics. Selected highlights of the corrugated container market include:

�Industry Structure The corrugated container industry consists of a few large "integrated" producers and

many smaller independent companies. The six largest integrated producers have nearly80% market share in both corrugated container and containerboard. In addition to theintegrated companies, there are numerous smaller, independent producers. The integratedcompanies include: Smurfit-Stone, Weyerhaeuser, Temple-Inland, International Paper,Georgia-Pacific and Packaging Corporation of America. There is also private equityinvestment in the industry. Private equity firms active in the segment include: MadisonDearborn (Packaging Corporation of America and Jefferson Smurfit), Northwest Capital(Port Townsend Paper), Code Hennessey & Simmons (Tharco Containers) andTransOcean Capital (Stronghaven).

Mergers & AcquisitionsActivity

The corrugated container market has experienced significant consolidation in recent years.The market share of the six largest players in the corrugated container industry isapproximately 79%, up from under 50% over the last ten years. We expect theconsolidation in the corrugated container market to continue, with the large integratedcompanies remaining the most active acquirers. Acquisitions will continue to be driven byopportunities to expand geographical presence, fill mill capacity and add capabilities andcustomers. We do not expect to see significant private equity involvement in this sector.

Financial PerformanceMetrics

Although detailed information on many corrugated container operations is not publiclyavailable, we have compiled a number of data points with which to assess the financialperformance of corrugated container companies. The median EBITDA margin for a groupof integrated producers is 12.3%. The median capital expenditures to sales of this group is4.6%. While many of these companies have a significant portion of their business outsideof corrugated containers, their financial performance measurements serve as usefulbenchmarks. In our experience, best-of-class EBITDA margins for corrugated containercompanies are in the high teens to low twenty percent range. However, the majority ofcorrugated container companies do not achieve these margins. It is important to recognizethat margins of these companies vary with the economic cycle.

August 2004


Valuation Metrics In order to establish valuation parameters, comparable public companies and mergers andacquisitions transactions are reviewed. There are few "pure play" public companies, andas a result, our comparable public company group includes the integrated producers andother packaging companies involved in paper and board packaging. EV/EBITDA multiplesfor the integrated producers and other packaging companies are 11.8x and 8.5x,respectively. While these are useful data points, it is important to realize that many of theseare large public companies with a significant portion of their business outside ofcorrugated containers. Recently completed comparable transactions have medianEV/EBITDA multiples of 6.7x (Exhibit XVII). We anticipate that the majority ofcorrugated container companies will be sold in the 5.0-7.0x EBITDA range; however,companies with certain characteristics will attract higher valuations. Companies that willattract a premium valuation will have many of the characteristics outlined in thePiper Jaffray February 2004 report entitled Mergers & Acquisitions Value Drivers forCompanies in the Packaging Industry.

August 2004


Overview The corrugated container market is one of the largest sectors of the packaging industry.According to the Fibre Box Association, the size of the corrugated container market isapproximately $22 billion (Exhibit I). Corrugated containers are typically used to protect,ship, store, market and display products. Corrugated containers include commodityproducts such as brown boxes as well as higher value-added products like point-of-purchase displays and containers with high-impact graphics. The largest end markets arefood and beverages. The corrugated container market has grown at a compound annualgrowth rate of 2.7% since 1992 (based on the value of corrugated shipments), althoughthe market has contracted in each of the past three years.

P A R T I I : O V E R V I E W

V A L U E O F C O R R U G A T E D S H I P M E N T S($ In Millions)

Exhibit I

Source: Fibre Box Association

Structure Corrugated containers are made from linerboard and medium, which are referred tojointly as containerboard. Containerboard is made in paper mills, with the largest sixplayers having 77% market share. Three different types of plants can be used in theconversion of containerboard into corrugated containers. These are corrugator plants,sheet plants and sheet suppliers (Exhibit II).

$15,000

$17,000

$19,000

$21,000

$23,000

$25,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

August 2004


Other23%

Top Six77%

D E S C R I P T I O N O F C O R R U G A T E D P A C K A G I N G P L A N T S

Exhibit II

Source: Association of Independent Corrugated Converters

The six largest vertically integrated producers have an approximately 79% share of thecorrugated container market (Exhibit III) and generally have an expansive geographicalfootprint in the United States (see Appendix A). The independents tend to serve regionalmarkets. There are more than 1,400 corrugated packaging plants currently operating,including approximately 600 corrugators and more than 800 sheet plants. According tothe Fibre Box Association, 84% of industry shipments in 2003 came from corrugatorplants with the remainder from sheet plants.

2 0 0 3 M A R K E T S H A R E O F T O P S I X P R O D U C E R S

Exhibit III

Source: Weyerhaeuser

Containerboard Corrugated Containers

Most corrugated products are custom manufactured to the purchaser's specifications.Corrugated producers generally sell within a 150-mile radius of their plants and competeprincipally with other corrugated producers in their local market. Producers of corrugatedcontainer generally compete based on price, quality, service, design and productinnovation.

Top Six79%

Other21%

Plant Type Description

Corrugator Plants Plants that combine containerboard into corrugated board. Typically, these plants also have equipment that converts the corrugated board into finished corrugated products including boxes, shipping containers, point-of-purchase displays and other kinds of protective and distribution packaging.

Sheet Plants Plants that purchase already-combined corrugated board and convert these into boxes, shipping containers and displays. In physical terms, these plants are usually smaller than corrugator plants, but they can also be highly specialized in their product mix—high-end graphics, inner-packing and other items to serve customer needs.

Sheet Suppliers Sheet suppliers' specialty is combining corrugated board into corrugated sheets exclusively for purchase by sheet plants. They have no other converting equipment to make finished boxes, shipping containers, point-of-purchase displays or other corrugated product.

August 2004


End Markets Corrugated containers are used in the food, beverage, health care, personal care, chemicalsand other industries (Exhibit IV). Food and beverages account for the largest share (40%of overall corrugated container demand). Nondurables, which account for approximately80% of total demand, may be the best indicator of demand for corrugated products.Moreover, as discussed in greater detail in the following section, demand for corrugatedcontainers is affected by the state of the economy, offshore competition and competingproducts.

D O M E S T I C C O R R U G A T E D C O N T A I N E R E N D M A R K E T D E M A N D

Exhibit IV


Stone, Clay, Glass3%

Electrical Machinery4%

Misc. Manufacturing4%

Other Durables11%

Other Nondurables4%

Rubber & Misc.7%

Chemicals & A llied Products

6%

Paper & Allied Products21%

Food & Beverage Products

40%

August 2004


P A R T I I I : I N D U S T R Y C H A R A C T E R I S T I C S

Overview As discussed in greater detail below, major characteristics of the current corrugatedcontainer market include the following:

• Highly competitive market;• Consolidating market;• Cyclical and competitive demand drivers;• High value-added opportunities; and• Continued M&A activity.

Highly CompetitiveMarket

In both the corrugated container and containerboard markets, there are a limited numberof integrated producers with significant market share and many independents with arelatively small share of the market. The industry is highly competitive as a result of bothexcess containerboard and corrugated board capacity. This condition has persisted despitethe fact that substantial capacity has recently been taken out of the market (Exhibit V). Inaddition, the recent multiyear cyclical downturn has resulted in weak overall demand,which has led producers to aggressively pursue available business. This excess capacity hasresulted in significant and sustained pricing pressure. While the competition remainsintense for the more commodity business, the large integrated producers are increasinglycompeting for shorter-run, more specialized business.

R E C E N T C A P A C I T Y C L O S U R E S

Exhibit V

Source: Packaging Corporation of America, Company data and Piper Jaffray estimates

Company Grade Location Description Volume (tons) Effective Date

Smurfit-Stone Corrugated Medium Thunder Bay, ON Closure 155,000 Oct-03

Smurfit-Stone Corrugated Medium Jacksonville, FL Shutdown 360,000 Oct-03

International Paper Linerboard Roanoke Rapids, NC Shutdown 300,000 Sep-03

Weyerhaeuser Corrugated Medium North Bend, OR Closure 275,000 Jul-03

Temple-Inland Linerboard Antioch, CA Closure 425,000 Dec-02

Temple-Inland Linerboard Bogalusa, LA Shutdown 170,000 Dec-02

Weyerhaeuser Corrugated Medium Sturgeon Falls, ON Closure 100,000 Dec-02

Smurfit-Stone Linerboard Missoula, MT Closure 180,000 Nov-02

Smurfit-Stone Corrugated Medium Hodge, LA Convert 150,000 Nov-02

Weyerhaeuser Corrugated Medium Hawesville, KY Shutdown 200,000 Sep-02

International Paper Containerboard Oswego, NY Closure 100,000 Jan-02

International Paper Linerboard Savannah, GA Shutdown 375,000 Jul-01

Weyerhaeuser Corrugated Medium Plymouth, NC Shutdown 215,000 Jun-01

Weyerhaeuser Linerboard Springfield, OR Shutdown 248,000 May-01

American Tissue Corrugated Medium Harriman, TN Closure 80,000 Apr-01

Smurfit-Stone Linerboard Fernandina, FL Shutdown 200,000 Apr-01

August 2004


103.0%

90.0%

80.0%

72.0%70.0%

77.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

110.0%

Temple-Inland Weyerhaeuser PackagingCorporation of

America

Smurtf it-Stone Georgia-Pacif ic InternationalPaper

Consolidating Market There has been significant consolidation in both the corrugated container andcontainerboard markets in the last few years. The six largest corrugated containerproducers currently have a 79% market share, compared to less than 50% ten years ago.These large producers are vertically integrated with integration levels varying from 100%for Temple-Inland to approximately 70% for International Paper (Exhibit VI). In addition,the integrated producers have been increasing their levels of forward vertical integration inrecent years.

Factors that have driven consolidation in the corrugated container market include: fillingavailable mill capacity, adding or enhancing capabilities, servicing national accounts andexpanding geographical presence. We expect these factors to continue to drive mergers andacquisitions activity in the future.

V E R T I C A L I N T E G R A T I O N O F T O P U . S . P R O D U C E R S

Exhibit VI

Source: Temple-Inland and International Paper

Cyclical and CompetitiveDemand Drivers

The demand for corrugated containers is primarily driven by (i) the state of the economy,(ii) offshore competition and (iii) competing products.

(i) The State of the Economy. Demand for corrugated containers grew steadily from theearly 1980s to 2000. However, since 2000, three consecutive years of declining sales havereflected the overall weakness in the economy (Exhibit VII). After the challenging recentmarket environment, annual growth of approximately 3% is expected to return over thenext several years, driven in large part by an improved economy.

The demand for corrugated containers is heavily influenced by the state of the economy,largely following domestic cyclical economic patterns. Until recently, the demand forcorrugated containers moved in correlation with GDP. However, more recently thedemand has been more closely associated with changes in nondurable goods production(Exhibit VIII). Nondurables account for approximately 80% of corrugated container endmarkets.

August 2004


0.95

1.05

1.15

1.25

1.35

1.45

1.55

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

1992

=1.0

0

Industrial Production GDP Box Shipments Non-Durable Goods Manufacturing

$15,000

$17,000

$19,000

$21,000

$23,000

$25,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

275

300

325

350

375

400

425

Value of Corrugated Shipments Box Shipments

The price of containerboard (i.e., linerboard and medium) also reflects the state of theeconomy. After increasing from 1997-2000, the price of linerboard and medium fell from2001-2003 (Exhibit IX). However, prices have recently risen and additional price increaseshave been announced in both linerboard and containerboard.

C O R R U G A T E D C O N T A I N E R M A R K E T G R O W T H($ In Millions, Billion Square Feet)

Exhibit VII


B O X S H I P M E N T S V . E C O N O M I C I N D I C A T O R S(1992=1.00)

Exhibit VIII

Source: Federal Reserve Board, Bureau of Economic Analysis and Fibre Box Association

August 2004


250

300

350

400

450

500

550

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003E 2004E

Linerboard Corrugating Medium

H I S T O R I C A L C O N T A I N E R B O A R D P R I C I N G($ Per Ton)

Exhibit IX


(ii) Offshore Competition. Corrugated container demand in the United States has beenaffected by offshore competition and fundamental changes in the domestic manufacturingbase in recent years. As manufacturing of many goods has moved offshore (e.g., to China),the production of corrugated containers has followed. Initially, many domestic corrugatedproducers exported product to service these new locations. However, more recentlycontainerboard capacity has increased in these offshore markets, resulting in decreasedexport demand (Exhibits X and XI). We expect continued migration of the manufacturingbase offshore with a corresponding negative effect on domestic corrugated containerdemand.

U . S . N O N D U R A B L E C O N S U M P T I O N V . P R O D U C T I O N(1992=1.00)

Exhibit X

Source: Federal Reserve Board

1.0

1.1

1.2

1.3

1.4

1.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Nondurable Goods Consumption Nondurable Goods Production

August 2004


1,000

2,000

3,000

4,000

5,000

1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004E

Sh

ort

To

ns

(000

s)

C O N T A I N E R B O A R D E X P O R T SShort Tons (000s)

Exhibit XI

Source: AF & PA

(iii) Competing Products. Corrugated containers experience competition from a numberof competing products, including reusable plastic containers, stretch and shrink-wrap, andintermediate bulk containers. While these products offer some advantages, corrugatedcontainers are expected to remain attractive due to the following advantages over theseand other competing products: price, performance, recyclability, biodegradability andhigh-quality graphics. Some substitution opportunities exist for corrugated containers,including small flute containers competing with folding carton applications.

High Value-AddedOpportunities

Profitability among corrugated container producers varies significantly. Competition andthe search for higher margins have led to an increased focus on innovation and highervalue-added offerings. Higher value-added products and services that offer the opportunityto earn higher margins include the following:

• High-quality graphics (such as those that can be printed on "white top"containerboard);

• Point-of-purchase displays;• Water-resistant packaging;• Specialty applications; and• Short-run, high-quality, quick turnaround production.

These specialized, higher value-added offerings enable producers to distinguish themselvesin the market from producers of more commodity-priced, nondifferentiated corrugatedproducts. However, the prospect of higher margins has led to increased competition inthese higher value-added areas.

August 2004


Continued M&A Over the past ten years there has been significant consolidation in the corrugated containersector, with the largest integrated producers significantly increasing their share of themarket. Drivers of the consolidation in the sector include opportunities to: (i) expandgeographical presence, (ii) fill mill capacity and increase production levels, (iii) add andenhance capabilities and (iv) add new customers and end markets.

We expect these factors to continue to drive mergers and acquisitions activity in the sector.The integrated producers will continue to be the most active acquirers of corrugatedcontainer companies. We believe that the stronger economy, resulting improvement incompanies' financial condition and more competitive capital markets will result in strongmergers and acquisitions activity in this sector going forward. This trend is already evidentthis year with a number of transactions in the sector, such as International Paper'sacquisition of Box USA, Georgia-Pacific's acquisition of two Inland Paperboard andPackaging facilities and Sonoco's purchase of CorrFlex Graphics.

August 2004


All Others23%

Packaging Corporation of America

7%

Temple-Inland10%

Georgia-Pacif ic11%

International Paper12%

Weyerhaeuser18%

Smurf it-Stone19%

P A R T I V : C O M P E T I T O R S

Overview The competitive landscape of the corrugated container market is characterized by a fewlarge integrated producers and numerous small independents. The integrated companiesproduce containerboard in their mills and supply at least 50% of the containerboardrequirements of their box plants. The market share of the top six corrugated container andcontainerboard producers is shown in Exhibits XII and XIII. Summary information on anumber of producers is provided in Exhibit XIV. Additional information on selectedcompanies is presented in Appendix A.

U . S . C O R R U G A T E D C O N T A I N E R M A R K E T S H A R E

Exhibit XII

Note: Market share data for International Paper does not reflect the company's recent acquisition of Box USA.Source: Weyerhaeuser

U . S . C O N T A I N E R B O A R D M A R K E T S H A R E

Exhibit XIII

Source: Weyerhaeuser

All Others21%


7%

International Paper9%

Georgia-Pacif ic12%

Temple-Inland13%

Smurf it-Stone19%

Weyerhaeuser19%

August 2004


Integrated Producers Smurfit-Stone Container Corporation

Smurfit-Stone is the largest corrugated container company in the United States with 19%market share of both containerboard and corrugated containers. The company is 77%integrated. Smurfit-Stone's Containerboard and Corrugated Containers division, whichmanufactures corrugated containers, containerboard, kraft paper, solid bleached sulfate,market pulp and other specialty products, accounts for 74% of the company's sales. In2003, corrugated containers accounted for 55% of the company's total sales. Smurfit-Stone has 16 containerboard mills and 135 corrugated container plants throughout theUnited States. Smurfit-Stone produces a full range of corrugated containers designed toprotect, ship, store and display products made to its customers' merchandising anddistribution specifications. The company's corrugated containers are used to package andtransport such diverse products as home appliances, electric motors, small machinery,grocery products, produce, computers, books and furniture.

Weyerhaeuser Company

Weyerhaeuser's U.S. market share of containerboard and corrugated containers is 18%and 19%, respectively. The company is 90% integrated. Weyerhaeuser's containerboard,packaging and recycling businesses include Containerboard, which manufactureslinerboard, corrugating medium and kraft paper, primarily used to produce corrugatedboxes at Weyerhaeuser's packaging facilities, and Packaging, which manufacturesindustrial and agricultural packaging. The company's containerboard, packaging andrecycling operations account for 22% of Weyerhaeuser's sales. Weyerhaeuser operates 11mills and 84 corrugated packaging plants in the United States. Weyerhaeuser's productsare manufactured for customers primarily in the food and beverage, agricultural, consumerproducts and industrial products industries. Weyerhaeuser is the largest manufacturer ofthese products for produce, protein and beverages.

International Paper

Prior to its recent acquisition of Box USA, International Paper had U.S. containerboardand corrugated container market shares of 12% and 9%, respectively. The company isapproximately 70% integrated (following the Box USA acquisition). International Paper'sIndustrial and Consumer Packaging division, which accounts for 23% of the company'ssales, manufactures containerboard, bleached packaging board, kraft and other industrialand consumer packaging products. International Paper is in the process of integrating BoxUSA's 24 industrial packaging converting facilities and containerboard mill into itsindustrial packaging business, which includes eight U.S. mills and 51 U.S. container plants,located primarily in the Midwest, Northeast and Southeast United States. InternationalPaper's products are specially manufactured to each customer's specifications. More thanone-third of International Paper's production consists of specialty grades, such as thosesold under the PineLiner and BriteTop brand names. The company's end markets includeagricultural, meats, juices, milk, food, bulk industrial products, cosmetics,pharmaceuticals, computer software, tobacco products and automotive products.

August 2004


Georgia-Pacific Corporation

Georgia-Pacific is the fourth largest supplier of corrugated containers in the United Stateswith 12% market share. The company has 11% of the U.S. containerboard market and is72% integrated. Georgia-Pacific's Packaging Products division, which represents 12% ofthe company's sales, manufactures bleached paperboard, containerboard, kraft paper andcorrugated containers (including display-ready packaging, double- and triple-wall boxes,water-resistant packaging and high-finish and preprinted packaging for point-of-saledisplays). Georgia-Pacific is the third largest seller of containerboard to independentconverters in the United States. One of the company's subsidiaries, Color Box, which itacquired in 2001, is the largest litho-laminated corrugated manufacturer in North Americaand the only graphic corrugated packaging producer with a national presence andplatform. Georgia-Pacific operates three containerboard mills, 12 corrugated sheet plantsand 34 corrugated box plants in the United States, predominately in the Midwest and onthe East Coast. The company's end markets include food and produce, beverage,agricultural, bulk industrial, automotive parts, chemicals, synthetic rubber and stampingand forgings.

Temple-Inland

Temple-Inland has a 10% share of the U.S. containerboard market and 13% share of theU.S. corrugated container market. The company is 103% integrated. Temple-Inland'scorrugated packaging products include cartons and boxes, point-of-purchase displays,commodity brown boxes, multiwall bulk containers, litho-laminate packaging and tear-resistant and waterproof packaging paper. The company's Corrugated Packaging divisionaccounts for 58% of Temple-Inland's sales. Temple-Inland has six containerboard mills, 19sheet plants/feeders and 48 corrugated packaging plants in the United States. In 2003, oldcorrugated containers ("OCC") represented 32% of the company's raw materialrequirements. The company's box plants produce a wide range of products fromcommodity brown boxes to intricate die-cut containers that can be printed with multicolorgraphics. Temple-Inland's corrugated packaging is sold to a variety of customers in thefood, paper, glass containers, chemical, appliance and plastics industries.


Packaging Corporation of America is the only large integrated company that is a "pure-play" participant in the corrugated sector. Packaging Corporation of America has a 7%share of both the U.S. market in the containerboard and corrugated container sectors. Thecompany is 80% integrated. The company's packaging products include conventionalshipping containers used to protect and transport manufactured goods, multi-color boxesand displays used to merchandise products in retail locations, and special design/application boxes used in the food and agriculture industry. Packaging Corporation ofAmerica's product segments include corrugated products (56% of sales) andcontainerboard (44% of sales). The company's products are manufactured at fourcontainerboard mills, 40 corrugated plants and 26 sheet plants in the United States.Packaging Corporation of America produces customized corrugated products forcustomers primarily in the following end markets: food, beverages and agriculturalproducts (41%), paper products (22%) and petroleum, plastic, synthetic and rubberproducts (13%). Local accounts comprise approximately 70% of the company'scustomers. Madison Dearborn owns 40% of Packaging Corporation of America.

August 2004


Company Name Sales Information Market Statistics Business Description End Markets

Georgia-Pacific Corp. Public NYSE: GP

Sales: $21,039 Packaging: $2,525 Corrugated Containers: $2,104

EV: $19,757 EBITDA: $2,502 EV/EBITDA: 7.9x Debt/EBITDA: 4.3x

Georgia-Pacific’s packaging products include unbleached linerboard, medium and corrugated containers including display-ready packaging, double- and triple-wall boxes, water-resistant packaging, and high-finish and preprinted packaging for point-of-sale displays.

Food/produce, beverage, agricultural, bulk industrial, automotive parts, chemicals, synthetic rubber, stampings and forgings.

Green Bay Packaging Private

Sales: $346 Packaging: NA Corrugated Containers: NA

EV: NA EBITDA: NA EV/EBITDA: NA Debt/EBITDA: NA

Green Bay Packaging manufactures paperboard packaging, corrugated containers, pressure-sensitive label stock, folding cartons and linerboards.

Products are used in a variety of markets.

Greif Public NYSE: GEF

Sales: $2,022 Packaging: $1,992 Corrugated Containers: NA

EV: $1,562 EBITDA: $229 EV/EBITDA: 6.8x Debt/EBITDA: 2.7x

Greif Brothers manufactures industrial shipping containers, containerboard and corrugated products. Greif’s paper packaging division produces fiber drums, semi-chemical and recycled medium, recycled linerboard, corrugated sheets, corrugated containers, corrugated materials for transit protection, void fillers and multiwall bags.

Agricultural, automotive, ceramics and glassware, food and beverage, furniture, home and building products, industrial products and pharmaceutical industries.

International Paper Public NYSE: IP



International Paper’s packaging products include containerboard, bleached packaging board, kraft, and other industrial and consumer packaging products.

Agricultural, meats, juice, milk, food, bulk industrial products, cosmetics, pharmaceuticals, computer software, tobacco products and automotive.

Interstate Resources (Indevco) Private



Interstate Resources manufactures corrugated boxes through three facilities in the Eastern United States. The Company also produces linerboard and medium.

Food and consumer products.

Kappa Packaging Group Private - Europe

Sales: $2,800 Packaging: NA Corrugated Containers: NA


Kappa Packaging is one of Europe’s largest companies engaged in the production, development and sale of containerboard, solid board, corrugated and solid board packaging, graphic and specialty board.

Food and consumer products.

Kruger Private - Canada



Kruger offers an array of products made from virgin and recycled fibers including newsprint, coated and supercalendered paper, linerboard, recovered paper, packaging, lumber, wood panels and tissue. The company's packaging products include folding cartons, point-of-purchase displays, boxes, diecuts and sheets.

Agricultural, consumer products, bulk and other industrial markets.

Longview Fibre Public NYSE: LFB

Sales: $785 Packaging: $620 Corrugated Containers: $416


Longview Fibre is a forest, paper and packaging products company. Packaging products include corrugated containers, specialty packaging, point-of-purchase displays, and shopping and merchandise bags for diverse end uses.

Computers, appliances, furniture, toys, foods, fresh fruits and vegetables, juice, wine, beer, hardware and other bulk markets.

Menasha Packaging Private



Menasha Packaging Company designs and manufactures corrugated containers, displays, protective packaging products, paperboard and paperboard substrates, folding cartons and commercial printing products.

Products are sold to a variety of industries.

Norampac Private - Canada

Sales: $973 Packaging: $973 Corrugated Containers: $569

EV: $1,243 EBITDA: $123 EV/EBITDA: NA Debt/EBITDA: 2.3x

Norampac manufactures containerboard, corrugated products, and a complete line of customized packaging products in North America and Canada. The Company is a joint venture between Cascades and Domtar.

Food, beverage, consumer products and various other industries.

S U M M A R Y O F S E L E C T P L A Y E R S I N T H E C O R R U G A T E D C O N T A I N E R S E C T O R($ In Millions)

Exhibit XIV

Source: Company information

August 2004


Smurfit-Stone Container Corporation Public NYSE: SSCC



Smurfit-Stone is the world’s largest manufacturer of paperboard and paper-based packaging, as well as a major paper recycler. Specific containerboard and corrugated products include corrugated containers, containerboard, kraft paper, solid bleached sulfate, market pulp and other specialty products.

Home appliances, electric motors, small machinery, grocery products, produce, computers, books and furniture.

Temple-Inland Public NYSE: TIN



Temple-Inland manufactures corrugated packaging, produces lumber and other building materials and operates a financial services group. The company’s corrugated packaging products include cartons and boxes, point-of-purchase displays, commodity brown boxes, multi-wall bulk containers, and tear-resistant and waterproof packaging paper.

Food, paper, glass containers, chemicals and appliances.

Weyerhaeuser Public NYSE: WY

Sales: $20,296 Packaging: $4,465 Corrugated Containers: NA


Weyerhaeuser grows and harvests timber, manufactures, distributes and sells forest products, and real estate development and construction. The company’s containerboard and packaging products include linerboard, corrugating medium, kraft paper, and industrial and agricultural packaging.

Food/beverage, agricultural, consumer and industrial products.

Packaging Corporation of America Public NYSE: PKG

Sales: $1,744 Packaging: $1,744 Corrugated Containers: $977


Packaging Corporation of America is a producer of containerboard and corrugated products, multi-color boxes and displays, and meat and wax-coated boxes for the agricultural industry. Specific corrugated packaging products include shipping containers and a range of linerboard grades.

Foods, beverages and agricultural products (41%); paper products (22%); appliances, machinery and vehicles (21%); petroleum, plastic, synthetic and rubber products (13%) and other (3%).

Pratt Industries Private - Australia



Pratt Industries is a privately-held paper and packaging company. Products include corrugated shipping containers, corrugated sheet, converted boxes and cartons and point-of-purchase displays.

Consumer, industrial and bulk markets.

Rock-Tenn Public NYSE: RKT

Sales: $1,519 Packaging: $1,519 Corrugated Containers: $297

EV: $999 EBITDA: $151 EV/EBITDA: 6.6x Debt/EBITDA: 2.8x

Rock-Tenn is a manufacturer of packaging, merchandising displays and 100%-recycled, clay-coated and specialty paperboard and corrugating medium. The Company’s operations manufacture folding cartons, solid-fiber interior packaging, corrugated packaging and corrugated sheet stock.

Food, consumer and industrial products.

Company Name Sales Information Market Statistics Business Description End Markets

S U M M A R Y O F S E L E C T P L A Y E R S I N T H E C O R R U G A T E D C O N T A I N E R S E C T O R($ In Millions)

Exhibit XIV (Continued)

Source: Company information

August 2004


Private Equity Firms Madison Dearborn Partners

Madison Dearborn Partners is a Chicago-based private equity firm specializing inmanagement buyouts and structured/growth equity transactions in middle marketcompanies. The firm focuses on basic industry sectors including communications, healthcare, consumer and media. Madison Dearborn invests in management buyout transactionsthat include private and public companies, divisions of larger companies, andrecapitalizations of family-owned and closely held companies.

Madison Dearborn has been very active in the corrugated container sector. In January1999, the firm acquired Packaging Corporation of America from Pactiv Corporation (andcurrently owns 40%). Madison Dearborn also acquired Jefferson Smurfit Group in June2002. Jefferson Smurfit manufactures containerboard, corrugated containers and otherpaper-based packaging products. The company's packaging segment includescontainerboard mills and corrugated container plants.

Code Hennesy & Simmons

Code Hennessy & Simmons is a Chicago-based private equity firm that seeks to acquiremajority ownership positions in middle market companies in the following industries:distribution, industrial products, consumer products and business services. It also invests inengineered materials, durable and nondurable consumer goods, packaging, OEMcomponents and building products. Code Hennessy & Simmons' most recent fund raisedapproximately $1 billion. The firm's portfolio currently consists of investments in 21operating companies with combined annual revenues of approximately $4.0 billion.

Code Hennessy & Simmons has been active in the corrugated sector of the packagingindustry. The firm invested in Tharco Containers in June 1998 and recently soldStronghaven Corrugated Containers to TransOcean Capital. Tharco is a California-basedmanufacturer of stock and customer corrugated boxes and related packaging productswith approximately $185 million in revenue.

Northwest Capital Appreciation

Northwest Capital Appreciation is a Washington-based private equity investment firm thatspecializes in buyouts, consolidations and recapitalizations of middle market companies infragmented industries. Northwest Capital has invested in forest products, broadcasting,specialty finance, commercial and residential security and budget cosmetics. The firm'smost recent fund totaled $62 million.

Northwest Capital owns The Port Townsend Group. Through its family of companies,including Crown Packaging and Boxmaster, Port Townsend is a $210 millionmanufacturer of packaging, cartons and displays for beverages, produce and packagedgood products.

August 2004


TransOcean Capital

TransOcean Capital is a Massachusetts-based private equity firm that considersinvestments in businesses engaged in the following industries: branded consumer products,electronics, outdoor products and sporting goods, specialty food and beverage, householdappliances, specialty textile products, specialty packaging, surgical, medical and laboratoryinstruments, industrial machinery, specialty building products, marine instruments andproducts, specialty chemicals and specialty vehicle manufacturers.

In November 2003, TransOcean acquired Stronghaven Corrugated Containers, anapproximately $100 million manufacturer of specialty corrugated containers and displayswith four plants in the southeastern U.S.

August 2004


EBIT

6.9% 6.8% 6.7%

5.5%5.2%

4.9%

2.7%

2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Georgia-Pacific

Norampac Weyerhaeuser InternationalPaper

PackagingCorporation of

America

LongviewFibre

Smurfit-StoneContainer

Temple-Inland

Median:5.4%

P A R T V : P E R F O R M A N C E M E T R I C S

Relative Margin Analysis Selected Companies Active in the Corrugated Container Sector

We reviewed the financial performance metrics of comparable companies. There is limitedfinancial performance information available on the corrugated container business becausethere are few "pure play" public companies. We have compiled financial performanceinformation from many of the integrated producers. Most of these companies have asignificant portion of their business outside of corrugated containers, with the only "pureplay" being Packaging Corporation of America. However, we believe that the financialperformance metrics we have presented serve as a useful benchmark. It is important torecognize that margins of these companies vary depending upon the stage of the economiccycle.

The median latest twelve months' ("LTM") gross margin for these companies is 21.2%.The median LTM EBIT margin is 5.4%. The median LTM EBITDA margin is 12.3%.The median LTM EBITDA-CapEx margin is 7.7%. Median capital expenditures as apercentage of sales, based on five-year weighted average historical information, is 4.6%(Exhibit XV). In our experience, best-of-class EBITDA margins for corrugated containercompanies are in the high teens to low twenty percent range. However, the majority ofcorrugated container companies do not achieve these margins.

C O R R U G A T E D C O N T A I N E R S S E G M E N T M A R G I N A N A L Y S I S

Exhibit XV

Note: Temple-Inland is excluded from the gross margin graph as the company reports all expenses (i.e., cost of sales andoperating expenses) in one line-item and thus comparison based on Temple-Inland's EBIT is more appropriate.Sources: Public filings and Company data

Gross Margin

24.3% 24.2%22.6%

21.2%

15.3% 14.8%

12.6%

10.0%

13.0%

16.0%

19.0%

22.0%

25.0%

28.0%

Norampac InternationalPaper

Georgia-Pacific Weyerhaeuser PackagingCorporation of

America

Longview Fibre Smurfit-StoneContainer

Median:21.2%

August 2004


C O R R U G A T E D C O N T A I N E R S S E G M E N T M A R G I N A N A L Y S I S

Exhibit XV (Continued)

Source: Public filings and Company data

EBITDA-CapEx

4.3%

5.4%

7.1%7.4%8.0%8.2%8.6%

9.8%

0.0%

3.0%

6.0%

9.0%

12.0%

Weyerhaeuser Georgia-Pacific

LongviewFibre

Norampac PackagingCorporation of

America

InternationalPaper


Temple-Inland

Median:7.7%

EBITDA

7.7%8.0%

11.9%12.0%12.7%

13.2%

14.3%14.9%

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

LongviewFibre

PackagingCorporation of

America

Weyerhaeuser Norampac InternationalPaper

Georgia-Pacific


Temple-Inland

Median:12.3%

5-Year Weighted Average CapEx/Sales

7.7%

6.6%

5.3% 5.0%

4.3% 4.1%

3.5%2.9%

0.0%

3.0%

6.0%

9.0%

Longview Fibre PackagingCorporation of

America

Norampac Weyerhaeuser InternationalPaper

Temple-Inland Georgia-Pacific Smurfit-StoneContainer

Median:4.6%

August 2004


P A R T V I : M E R G E R S & A C Q U I S I T I O N S A C T I V I T Y

M&A Value Drivers Packaging companies that exhibit certain differentiating characteristics attract moreinterest and higher valuations from potential buyers. We refer to these characteristics asvalue drivers. These value drivers influence the ability of acquirers to continue their growthand enhance their profitability. Piper Jaffray has identified several value drivers forpackaging companies which are outlined in Exhibit XVI and discussed in detail in thePiper Jaffray February 2004 report entitled Mergers & Acquisitions Value Drivers forCompanies in the Packaging Industry.

V A L U E D R I V E R S

Exhibit XVI

Source: Piper Jaffray

M&A Activity In recent years there has been a large number of transactions in the corrugated containersector. These have included a number of small transactions; however, several notable largertransactions have also occurred. The most active acquirers have been the integratedproducers. Private equity groups have also been active in the sector. Recent transactionsinclude:

Sonoco Acquired Corrflex Graphics (May 2004)

In May 2004, Sonoco acquired Corrflex Graphics for $250 million. The company designsand manufactures point-of-purchase displays, specialty folders, flexible packagingmaterials, high-graphics packaging and other corrugated products. Corrflex is expected togenerate sales of approximately $200 million in 2004.

Exc

epti

onal

Val

ue

Dri

vers

Fun

dam

enta

l Val

ue D

rive

rs

Participation in Attractive End

Markets

Strong Relationships with Marquee

Customers

End Markets

Industry Leading Design Capabilities

High Value Added Products

Products

Strategically Located Facilities

Efficient Manufacturing

Capabilities

Operations

Strong Financial Performance

Financial

Management Team

Growth

Size

Synergies

Creatin

g Valu

e

Exc

epti

onal

Val

ue

Dri

vers

Fun

dam

enta

l Val

ue D

rive

rs

Participation in Attractive End

Markets

Strong Relationships with Marquee

Customers

End Markets

Industry Leading Design Capabilities

High Value Added Products

Products

Strategically Located Facilities

Efficient Manufacturing

Capabilities

Operations

Strong Financial Performance

Financial

Management Team

Growth

Size

Synergies

Creatin

g Valu

eC

reating V

alue

Efficient Capital

Utilization

August 2004


Comparable M&ATransactions

In order to establish valuation parameters we have compiled a group of relevant dealsfrom the corrugated container market and related markets for which data is publiclyavailable. The median and mean EV/EBITDA multiples for these comparable transactionsare 6.7x and 7.0, respectively (Exhibit XVII). We anticipate that the majority ofcorrugated container companies will be sold in the 5.0-7.0x EBITDA range; however,companies with certain characteristics will attract higher valuations. Companies that willattract a premium valuation will have many of the characteristics outlined in thePiper Jaffray February 2004 report entitled Mergers & Acquisitions Value Drivers forCompanies in the Packaging Industry.

International Paper Acquired Box USA (April 2004)

In April 2004, International Paper announced its acquisition of corrugated packagingmanufacturer Box USA. Box USA was the nation's largest independent packagingproducer with annual sales of approximately $241 million. The acquisition provided IPwith improved access to markets, better integration between mills and converting plants,and other operating synergies for its expanding industrial packaging business.

Georgia-Pacific Acquired Two Inland Paperboard and Packaging Facilities (April 2004)

In April 2004, Georgia-Pacific acquired two high-end, litho-laminated corrugatedpackaging facilities from Inland Paperboard and Packaging. The plants are located inOntario, CA, and Harrington, DE. The Ontario packaging facility produces high-end,litho-laminated packaging and serves customers in the toy, electronics, produce andconsumer goods industries. The Harrington packaging facility produces high-end, litho-laminated corrugated packaging for beverage, consumer goods and telecommunicationscustomers. The facilities are managed by Color-Box, a wholly owned subsidiary ofGeorgia-Pacific, and serve both national and local customers.

Packaging Corporation of America Acquired Acorn Corrugated Box Company(February 2004)

In February 2004, Packaging Corporation of America acquired Acorn Corrugated BoxCompany, an Illinois-based producer of high-quality graphics packaging and displays.Acorn has annual sales of approximately $45 million. The acquisition enables PCA toexpand its capability to serve the growing graphics packaging and display segment, andincreases the company's presence in the Chicago market.

August 2004


R E C E N T C O R R U G A T E D P A C K A G I N G M & A T R A N S A C T I O N S

Exhibit XVII

Source: Securities Data Company and Company data

DateAnnounced Acquirer Name Target Name Target Business Description

05/04 Sonoco Products Company CorrFlex Graphics Manufacturer of point-of-purchase displays and other corrugated products.

04/04 International Paper Box USA Manufacturer of corrugated packaging materials.

04/04 Georgia Pacific Inland Paperboard and Packaging Inc. Manufacturer of containerboard, bleached paperboard and corrugated packaging products.

02/04 Packaging Corporation of America Acorn Corrugated Box Company Manufacturer of graphics packaging products and machinery.

02/04 Dainippon Shigyo Co Ltd Nippon Hi-Pack Co Ltd Manufacturer of cardboard products.

02/04 Warburg Pincus Clondalkin Group plc Manufacturer of packaging and print products.

12/03 SCA Vincor Group Manufacturer of specialty corrugated packaging products.

09/03 Greif Inc CorrChoice Manufacturer of corrugated cardboard packaging.

06/03 Smurfit Espana Papelera Navarra SA Manufacturer of corrugated cardboard, kraft paper and machine-glazed paper.

03/03 Riverwood Holding Inc Graphic Packaging International Manufacturer of paperboard packaging for food, beverage and other consumable product markets.

01/03 Rock-Tenn Co Cartem Wilco Group Inc Manufacturer of folding cartons for hair colorant, pharmaceutical and cosmetic markets.

06/02 Madison Dearborn Partners Jefferson Smurfit Group PLC Manufacturer of containerboard, corrugated containers and other paper-based packaging products.

09/01 Temple-Inland Inc Gaylord Container Corp Manufacturer of corrugated containers, corrugated sheets and containerboard.

09/01 ITC ITC Bhadrachalam Paperboards Manufacturer of paperboard packaging and graphic applications.

09/01 Caraustar Industries Smurfit-Stone Container - Industrial pkg segment Industrial packaging business consisting of 17 paper tube and core plants, three uncoated recycled paperboard mills and three partition manufacturing plants.

08/01 Mead Corp Westvaco Corp Manufacturer of bleached and unbleached paper and paperboard packaging.

06/01 Nobleford Investments Ltd IRE-TEX Group PLC Manufacturer of protective packaging using mediums including corrugate, foam and timber.

04/01 Sanyo Engineering (Solo Cup Co) Sanyo Pax Manufacturer of paperboard food containers.

04/01 Clondalkin Group European Packaging Holding Group Manufacturer of folding cartons and flexible packaging products.

12/00 Huhtamaki Packaging Resources Inc Manufacturer of containers and cups for food packaging.

11/00 Silverneedle Investments BV Steniel Manufacturing Corp Manufacturer of corrugated products and rigid plastic containers, which include slotted containers, telescopic box, pizza box, five-panel box, angle board and corrugated pallets.

08/00 Metsa-Serla Oy Zanders Feinpapiere AG (M-Real) Manufacturer of paperboard, special coated printing papers, cast-coated papers and boards, and bonded papers.

07/00 Cascades Inc Paperboard Industries Intl Inc Manufacturer of paperboard, molded pulp products, kraft paper and uncoated paper.

05/00 MY Holdings Bonar Cartons Manufacturer of folding cartons.

04/00 Westvaco IMPAC Group Manufacturer of specialty packaging and printing for a wide variety of consumer product markets.

02/00 Smurfit-Stone Container Corp St Laurent Paperboard Inc Manufacturer of paperboard substrates and packaging solutions.

02/00 International Paper Co Shorewood Packaging Corp Manufacturer of paperboard packaging for the cosmetics, homevideo, music software, tobacco, toiletries and general consumer markets.

01/00 Mail-Well American Business Products Manufacturer of paper-based packaging, labels and custom-printed envelopes and business forms.

EnterpriseValue Enterprise Value/($ mil) Sales EBIT EBITDA

$250.0 1.3x na na

na na na na

na na na na

na na na na

$88.2 0.4x na 7.8x

$919.5 1.0x na 7.8x

$11.7 0.8x 5.8x 4.6x

$115.3 0.5x na na

$55.7 na na 5.9x

$430.0 0.4x na 8.0x

$65.5 na na 5.0x

$3,315.0 0.8x 9.7x 6.0x

$1,027.9 0.9x 16.6x 8.8x

$158.4 1.4x 10.8x 6.7x

$80.0 0.6x na 5.3x

$5,608.0 1.5x 12.0x 7.0x

$12.0 0.4x 5.8x 4.4x

$37.2 0.4x 11.1x 4.4x

$45.0 0.7x na 5.3x

$165.0 1.2x 43.2x 11.6x

$15.9 0.4x 24.6x 6.0x

$124.0 0.2x 12.9x 3.1x

$370.0 0.7x na 10.0x

$120.0 0.7x 20.5x 9.4x

$509.0 1.5x na 8.5x

$1,379.3 1.5x 18.4x 9.6x

$876.1 1.5x 14.2x 9.9x

$334.0 0.7x 9.2x 6.6x

Mean 0.8x 15.3x 7.0xMedian 0.7x 12.5x 6.7x

Valuation Analysis

August 2004


Paper & Board Packaging

Gross EBITDA- Gross EBITDA- Market Enterprise EBITDA- Price/

Company Revenue Profit EBIT EBITDA CapEx Profit EBIT EBITDA CapEx Value Value Revenue EBIT EBITDA CapEx Earnings

Cascades Inc. $2,445.8 $448.2 $62.7 $176.7 $88.0 18.3% 2.6% 7.2% 3.6% $1,131.5 $2,038.6 0.8x 32.5x 11.5x 23.2x NMF

Chesapeake Corporation 949.7 176.1 51.6 109.2 60.5 18.5% 5.4% 11.5% 6.4% 498.1 888.0 0.9x 17.2x 8.1x 14.7x 14.8x

Gibraltar Packaging Group Inc. 61.5 10.8 3.4 5.6 4.5 17.5% 5.5% 9.1% 7.2% 9.8 22.5 0.4x 6.6x 4.0x 5.1x 4.9x

Graphic Packaging Corporation 1,961.2 322.7 144.1 330.8 168.8 16.5% 7.3% 16.9% 8.6% 1,446.5 3,654.5 1.9x 25.4x 11.0x 21.6x NA

Longview Fibre Company 785.4 115.9 38.1 117.3 64.4 14.8% 4.9% 14.9% 8.2% 740.1 1,245.8 1.6x 32.7x 10.6x 19.4x NMF

Rock-Tenn Company 1,519.4 270.1 76.4 150.8 72.6 17.8% 5.0% 9.9% 4.8% 582.5 998.6 0.7x 13.1x 6.6x 13.8x 23.5x

Sonoco Products Company 2,797.3 496.1 206.2 367.1 254.0 17.7% 7.4% 13.1% 9.1% 2,514.6 3,103.1 1.1x 15.1x 8.5x 12.2x 28.5x

High 18.5% 7.4% 16.9% 9.1% 1.9x 32.7x 11.5x 23.2x 28.5x

Mean 17.3% 5.4% 11.8% 6.8% 1.1x 20.4x 8.6x 15.7x 17.9x

Median 17.7% 5.4% 11.5% 7.2% 0.9x 17.2x 8.5x 14.7x 19.2x

Low 14.8% 2.6% 7.2% 3.6% 0.4x 6.6x 4.0x 5.1x 4.9x

Margins (%)LTM Financial Performance Enterprise Value/

P A R T V I I : P U B L I C C O M P A N Y V A L U A T I O N S

Comparable PublicCompany Valuations

To assist in establishing valuation parameters for corrugated container companies we havecompiled financial performance and valuations for two different groups of comparablepublic companies (Exhibit XVIII). The first group is comprised of the integrated producers.It is important to note that among this group, only Packaging Corporation of America is a"pure play" corrugated business. Most of these companies have a large portion of theirbusiness outside of the corrugated sector. Our other group of comparable companiesconsists of packaging companies involved in paper and board packaging which have no orlimited involvement in the corrugated container sector.

The median integrated paper and packaging EV/EBITDA is 11.8x. The median paper andboard packaging EV/EBITDA multiple is 8.5x. While these are useful data points, it isimportant to realize that many of these are large public companies have a significantportion of their business outside of corrugated containers.

C O R R U G A T E D P A C K A G I N G C O M P A R A B L E C O M P A N Y V A L U A T I O N S($ In Millions)

Exhibit XVIII

Source: Public filings and Company data

Integrated Paper & Packaging

Gross EBITDA- Gross EBITDA- Market Enterprise EBITDA- Price/

Company Revenue Profit EBIT EBITDA CapEx Profit EBIT EBITDA CapEx Value Value Revenue EBIT EBITDA CapEx Earnings

Georgia-Pacific Corporation $21,039.0 $4,761.0 $1,462.0 $2,502.0 $1,806.0 22.6% 6.9% 11.9% 8.6% $9,096.7 $19,756.7 0.9x 13.5x 7.9x 10.9x 21.6x

International Paper Company 25,564.0 6,188.0 1,405.0 3,057.0 1,812.0 24.2% 5.5% 12.0% 7.1% 21,191.3 36,154.3 1.4x 25.7x 11.8x 20.0x 63.1x

MeadWestvaco Corporation 7,692.0 1,065.0 217.0 942.0 562.0 13.8% 2.8% 12.2% 7.3% 5,848.5 9,820.5 1.3x 45.3x 10.4x 17.5x 85.6x

Temple-Inland Inc. 4,666.0 1,017.0 93.0 361.0 199.0 21.8% 2.0% 7.7% 4.3% 3,780.7 12,314.7 2.6x NMF 34.1x 61.9x 29.4x

Weyerhaeuser Company 20,296.0 4,305.0 1,362.0 2,683.0 1,998.0 21.2% 6.7% 13.2% 9.8% 13,728.0 26,245.0 1.3x 19.3x 9.8x 13.1x 30.4x

Packaging Corporation of America 1,743.5 265.9 91.5 248.9 129.3 15.3% 5.2% 14.3% 7.4% 2,529.8 3,136.8 1.8x 34.3x 12.6x 24.3x NMF

Smurfit-Stone Container Corporation 7,787.0 980.0 210.0 624.0 424.0 12.6% 2.7% 8.0% 5.4% 4,886.7 9,838.7 1.3x 46.9x 15.8x 23.2x NMF

High 24.2% 6.9% 14.3% 9.8% 1.8x 60.2x 15.8x 28.2x 85.6x

Mean 18.8% 4.6% 11.3% 7.1% 1.3x 35.0x 12.0x 19.6x 46.0x

Median 21.2% 5.2% 12.0% 7.3% 1.3x 34.3x 11.8x 20.0x 30.4x

Low 12.6% 2.0% 7.7% 4.3% 0.9x 13.5x 7.9x 10.9x 21.6x

Margins (%)LTM Financial Performance Enterprise Value/

August 2004


EBIT Margin: 6.9%EBITDA Margin: 11.9%EBITDA-CapEx Margin: 8.6%

A P P E N D I X A : A D D I T I O N A L I N F O R M A T I O N O N S E L E C T C O M P A N I E S

Georgia-PacificHeadquarters: Atlanta, GANYSE Symbol: GP

Product Segments

End Markets

Geographical Presence

Selected Financial Information

Growth and Acquisition Strategy

Two-Year Stock Price and Volume

• Description: Manufactures tissue, packaging, paper,building products, pulp and related chemicals

• Packaging Products: Unbleached linerboard;medium, in roll form; and corrugated containersincluding display-ready packaging, double and triple-wall boxes, water-resistant packaging, and high-finish and preprinted packaging for point-of-saledisplays

• Recently acquired the Ontario and Harringtonfacilities of Inland Paperboard and Packaging.

• In 2001, Georgia-Pacific purchased an additionalstake in Color-Box, LLC, a manufacturer oflitho-laminated corrugated graphic packaging.Georgia-Pacific now owns 81% of Color-Box.

Sales: $21.0 billionEBIT: $1.5 billionEBITDA: $2.5 billion

Acquisition History

• Food/Produce• Beverage• Agricultural• Bulk industrial

• Automotive parts• Chemicals• Synthetic rubber• Stampings and forgings

Business Description

Packaging16%

Consumer Products

41%

Building Products

33%

Bleached Pulp & Paper10%

0

5,000

10,000

15,000

20,000

25,000

6/28/02 10/11/02 1/24/03 5/09/03 8/22/03 12/05/03 3/19/04 7/02/04

Date

Vo

lum

e (0

00s)

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Sto

ck Price

Corrugated box

Corrugated sheet plant / feeder

Headquarters

Containerboard mills

Target Name Target SalesDate Business Description ($ million)

Apr-04 Inland Paperboard and Packaging Ontario and Harrington facilities NA Manufactures tissue, packaging, paper and building products

Nov-01 Color-Box, LLC (Chesapeake Corp.) NA Manufactures corrugated and solid fiber boxes

Nov-00 Fort James Corporation $6,930 Manufactures tissue products and disposable tabletop products

Oct-00 Celanese Chemicals Formaldehyde Business NA Operates a formaldehyde business

Jul-99 Unisource Worldwide, Inc. $7,417 Manufactures disposable paper, plastic products packaging systems

Source: FactSet, Public filings and Company data

August 2004


International PaperHeadquarters: Standford, CTNYSE Symbol: IP

Product Segments

End Markets





• Description: Forest products company whichproduces plywood, paper, pulp, and packaging, andprocesses by-product chemicals of the papermakingprocess

• Packaging Products: Containerboard, bleachedpackaging board, kraft, and other industrial andconsumer packaging products

• International Paper announced last month that itwould acquire Box USA for an undisclosedamount. The acquisition provides IP withimproved access to markets, better integrationbetween mills and plants, and other operatingsynergies.

• The Company paid 1.4x revenue and 8.6xEBITDA for Shorewood Packaging in 2000 inorder to strengthen its position in retailpackaging.


Acquisition History

• Agricultural• Meats• Juice• Milk• Food

• Bulk industrial products• Cosmetics• Pharmaceuticals• Computer software• Tobacco products• Automotive


Container plants

Headquarters


Sheet plant


0

5,000

10,000

15,000

20,000

25,000

30,000

6/28/02 10/11/02 1/24/03 5/09/03 8/22/03 12/05/03 3/19/04 7/02/04

Date

Vo

lum

e (0

00s)

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Sto

ck Price


Apr-04 Box USA $241 Manufactures corrugated boxes, cartons and display items

Dec-02 Bell Bay (Starwood Australia) NA Manufactures medium density fiberboard

Apr-01 Tasman Kraft (Norske Skog) NA Manufactures paper and pulp

Jun-00 Champion International Corp. $5,361 Manufactures paper

Mar-00 Shorewood Packaging Corp. $592 Manufactures paperboard packaging

Jan-00 Ace Packaging Systems Inc NA Packaging services for domestic and overseas shipments

Aug-99 Bolsaflex SA NA Produces graphics plastic packaging

Distribution24%

Other14%

Industrial & Consumer Packaging

23%

Printing Papers28%

Forest Products

11%


August 2004


Packaging Corporation of AmericaHeadquarters: Lake Forrest, ILNYSE Symbol: PKG

Product Segments





• Description: Producer of containerboard andcorrugated products, multi-color boxes and displays,and meat and wax-coated boxes for the agriculturalindustry

• Corrugated Packaging Products: Conventionalshipping containers used to protect and transportmanufactured goods and a range of linerboard grades

• Intends to grow its corrugated products volumeboth internally and through acquisitions.

• Recent additions of sheet plants have improvedPCA's level of forward integration.

• PCA acquired Acorn Corrugated Box in February2004 in order to strengthen its business in theChicago market.

Sales: $1.7 billionEBIT: $92 millionEBITDA: $249

Acquisition History



Corrugated packaging plants

Sheet / specialty plants


Headquarters

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

6/28/02 10/11/02 1/24/03 5/09/03 8/22/03 12/05/03 3/19/04 7/02/04

Date

Vo

lum

e (0

00s)

$0

$5

$10

$15

$20

$25

$30

Sto

ck Price

Corrugated Products

56%

Containerboard44%

End Markets

Paper Products22%

Appliances, Machinery and

Vehicles21%

Other3%

Food, Beverages and Agricultural

Products41%

Petroleum, Plastic,

Synthetic and Rubber Products

13%


Feb-04 Acorn Corrugated Box Co. $45 Manufactures fiber boxes and plastics materials

Jul-02 Packaging Holdings LLC $235 Manufactures paper and packaging

Jun-01 Sunbelt Packaging Services Inc NA Manufactures boxes for packaging services


August 2004


Corrugated container plants


Headquarters

Sales: $7.8 billionEBIT: $210 millionEBITDA: $624 million


Smurfit-StoneHeadquarters: Chicago, ILNYSE Symbol: SSCC

Product Segments

End Markets





• Description: Forest products company whichproduces plywood, paper, pulp, and packaging, andprocesses by-product chemicals of the papermakingprocess

• Containerboard and Corrugated Products:Containerboard, bleached packaging board, kraft,and other industrial and consumer packagingproducts

• Selectively seeks acquisitions to broaden itsproduct range and meet the demand for value-added packaging (e.g. Packaging Services Group).

• Solid track record of achieving cost synergiesfrom acquisitions.

Acquisition History

• Home appliances• Electronic motors• Small machinery• Grocery products

• Produce• Computers• Books• Furniture


Other4%

Containerboard and Corrugated

Containers74%

Consumer Packaging

22%

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Jun-03 Arko Paper Products Co. Inc. $27 Manufactures folding cartons

Sep-02 MeadWestvaco Corp.--Stevenson mill/related assets $247 Corrugating medium mill

Aug-02 Packaging Services Group $23 Corrugated and solid fiber boxes

Dec-01 AT Plastics, Inc.--Packaging business NA Manufactures specialty, industrial flexible plastic packaging

Jun-01 Corporation Durango SA de CV--Bag packaging operations NA Manufactures bag packaging

May-00 St. Laurent Paperboard $987 Manufactures linerboard, foodboard, corrugated sheets

Nov-98 Stone Container Corp. $5,051 Manufactures containerboard, corrugated containers, multiwall bags


August 2004


• Food• Paper• Glass containers

• Chemicals• Appliances

• The acquisition of Gaylord was part of Temple-Inland's strategy to increase integration andserved to position the Company as the numberthree box company.

• Temple realized over $60 million in synergiesrelated to the Gaylord acquisitions within oneyear.

Sales: $4.7 billionEBIT: $93 millionEBITDA: $361 million


Temple-InlandHeadquarters: Austin, ILNYSE Symbol: TIN

Product Segments

End Markets





• Description: Manufacturers corrugated packaging,produces lumber and other building materials, andoperates a financial services groups

• Corrugated Packaging Products: Cartons and boxes;point-of-purchase displays; commodity brown boxes;multi-wall bulk containers; litho-laminate packaging;and tear-resistant and water-proof packaging paper

Acquisition History


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Financial Services

25%

Forest Products

17%

Corrugated Packaging

58%



Sheet plant / feeder

Headquarters


Feb-04 TCT Insurance Group NA Provides property and casualty insurance services

May-02 Converting Operations of Alwin Kolb Gmbh & Co NA Manufactures containerboard and packaging products

Apr-02 Gaylord Container Corp. $1,052 Manufactures corrugated containers, corrugated sheets, containerboard

May-01 Capitol Packaging Corp (Chesapeake Packaging Co.) NA Manufactures paperboard and packaging products

Feb-01 Corporate Finance Division Of Finova Group Inc NA Financing and capital markets products

Jun-99 HF Bancorp, Inc. $28 Financial services to consumers and small businesses


August 2004


• Weyerhaeuser intends to sell a number of itsplywood and lumber mills in order to improve itsstrategic focus and competitiveness.

• The Company continues to attempt to fullycapture synergies from its March 2002acquisition of Willamette.

• Following its 2002 acquisitions, Weyerhaeuser isthe number one box maker in the United States.

• Food/Beverage• Agricultural

• Consumer products• Industrial products



WeyerhaeuserHeadquarters: Federal Way, WANYSE Symbol: WY

Product Segments

End Markets





• Description: Grows and harvests timber;manufactures, distributes and sells forest products;and real estate development and construction

• Containerboard Packaging Products: Linerboard;corrugating medium; kraft paper; and industrial andagricultural packaging

Acquisition History


Containerboard, Packaging, &

Recyc ling22%

Pulp & Paper19%

Wood Products41%

Other18%



Headquarters

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Mar-02 Willamette Industries $4,454 Manufactures corrugated boxes and sheets, linerboard, paper bags

Jun-01 West Fraser Timber Co Ltd. - Uruguayan operations NA Manufactures lumber, pulp and paper, panels and plywood

Oct-00 Coast Mountain Hardwoods NA Manufactures and supplies lumber and timber

Jan-00 TJ International Inc. $849 Manuactures scaffold plank, concrete forming, window and door core

Nov-99 MacMillan Bloedel Limited NA Manufactures containerboard, market pulp, corrugated containers


August 2004


A U T H O R B I O G R A P H I E S

Douglas J. Lawson, Vice PresidentDoug Lawson is a Vice President in the Chicago-based Middle Market Mergers andAcquisitions Group at Piper Jaffray. His transaction experiences includes numerous salemandates, buy-side advisory services, leveraged buyouts, fairness opinions and financingsfor a wide variety of clients, including private equity groups, public companies andprivately owned businesses. Lawson has written extensively on the mergers andacquisitions market including the following topics: M&A in the packaging industry, theLBO market, trends in acquisition consideration and the tax effects of an M&Atransaction.

Prior to joining Piper Jaffray, Lawson was a Director in the Fixed Income OriginationGroup at ABN AMRO Inc. Previously he was head of the Global Project andInfrastructure Finance Group at Duff & Phelps and worked as a financial analyst atDBRS. Lawson gained experience in public accounting at Ernst & Young and Coopers &Lybrand and in law at a large Canadian law firm.

Lawson graduated with a Bachelor of Arts degree and a law degree from the University ofWestern Ontario. He is a lawyer and an accountant.

Chad E. Bell, AssociateChad Bell is an Associate in the Chicago-based Middle Market Mergers and AcquisitionsGroup at Piper Jaffray. His transaction experience includes exclusive sale assignments,leveraged buyouts and fairness opinions. In addition, he has experience in valuation,financial modeling and industry and company research.

Prior to joining Piper Jaffray, Bell was an Associate in the private equity-oriented mergersand acquisitions group at Heller Financial. He also previously worked at Harris Williams& Co., where he focused on middle market mergers and acquisitions.

Bell holds Bachelor of Arts degrees in History and Political Science from Oklahoma BaptistUniversity. He received a Master of Science degree in Foreign Service from GeorgetownUniversity, with a concentration in international finance.

Andrew H. Schwartz, AnalystAndy Schwartz is an Analyst in the Chicago-based Middle Market Mergers andAcquisitions Group at Piper Jaffray. His transaction experience includes exclusive saleassignments, leveraged buyouts and fairness opinions. In addition, he has experience infinancial modeling and industry and company research.

Prior to joining Piper Jaffray, Schwartz was an Analyst in the Business Valuation Group atStout Risius Ross, where he performed business valuations primarily related to transactionadvisory, ESOP, and management and estate planning purposes.

Schwartz holds a Bachelor of Business Administration degree with emphasis in Financeand Accounting from the University of Michigan.

August 2004


N O T E S

August 2004


Piper Jaffray is known in the M&A marketplace for providing insightful and timely analysis on M&A activity. As wecontinually strive to develop our knowledge and expertise in the industries in which we focus, we regularly publishinformative and technical articles and reports on M&A topics in the sectors we cover.

M&A Insights: Industry and Technical Reports Packaging Industry Publications

Visit our Web site at—www.piperjaffray.com/ma—view a summary of the above listed products, request a copy orsubscribe to our distribution list. Please contact Cynthia Zebro at [email protected] or 612 303-5685 forcomments or questions.

P I P E R J A F F R A Y M & A R E P O R T I N D E X

- Valuations in the Specialty Chemical Industry- Middle Market M&A Outlook- Security & Safety Products & Services Industry Overview- Specialty Chemical Industry Overview- U.S. Leveraged Buyout Market from 1980-2002- European Food Industry- The Effect of an Acquisition on Earnings Per Share

Accretion/Dilution Analysis- Tax-Free Acquisitions- Trends in Acquisition Consideration- UK Orphan Companies- Industrial Distribution- Private Equity Survey- Endangered Species- Taxable Sales of C Corporations- Housewares and Household Products- Taxable Sales of S Corporations- Construction Materials Industry Update- Putting the Collar on Stock Deals- Die-Casting Industry Report- What About a Dutch Auction?- Mezzanine Financing Demystified- Mining Higher Aggregate Company Values- Make Your Cash Flow Sing, Your Stock Will Dance- Leveraged Recapitalization: Financing

- Corrugated Containers: A Mergers and AcquisitionsReview

- Mergers & Acquisitions in the Packaging Industry—2003 Year in Review and 2004 Outlook

- Mergers & Acquisitions Value Drivers forCompanies in the Packaging Industry

- Packaging Industry Valuation Considerations:Capital Expenditures

- Caps and Closures: A Mergers and AcquisitionsReview

- Valuations in the Packaging Industry- Packaging Industry Public Acquirers—Earnings per

Share Accretion/Dilution Considerations- Mergers & Acquisitions in the Packaging Industry—

2002 Year in Review- Plastics: Consolidating the Injection Molding Industry

The WrapThe Wrap is a monthly e-newsletter that covers topicsrelated to current M&A activity in the packaging industry.

Month Spotlight TopicsJul '04 Public Valuation and PricingJun '04 Packaging Purchase AgreementsMay '04 Molded Fiber PackagingApr '04 Packaging Acquisition TrendsMar '04 Packaging Market Review and OutlookFeb/Jan '04 Value DriversDec '03 End Market PerformanceNov '03 Capital ExpendituresOct '03 Relative Enterprise ValueSep '03 Leverage StatisticsAug/Jul '03 Raw MaterialsJun '03 Caps and ClosuresMay '03 Leveraged BuyoutsApr '03 ValuationsMar/Feb '03 Packaging Market Update

M&A MonitorThe M&A Monitor is published every two weeks andfeatures a variety of middle market M&A industryinformation, including industry and transactionmultiples, public company premiums, and buyoutfundraising and financing statistics. Each issue featuresan M&A topic-related feature article and a highlightedtransaction.

© 2004 Piper Jaffray & Co., 800 Nicollet Mall, Suite 800, Minneapolis, Minnesota 55402-7020 04-0098

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Matthew J. FlowerPrincipal+44-020-7743-8702

David I. WilsonManaging Director+44-020-7743-8701

PIPER JAFFRAY LTD.

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Peter M. GillManaging Director612 303-6312

Murray C. HunekeManaging DirectorHead of Consumer650 838-1388

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Scott R. LaRueManaging DirectorHead of Consumer M&A650 838-1407

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Robert P. RinekManaging DirectorHead of FinancialInsititutions612 303-6306

FINANCIAL INSTITUTIONS

CONSUMER

David P. CrosbyManaging Director612 303-6300

Michael R. DillahuntPrincipal612 303-6337

Douglas J. LawsonVice President312 920-2139

John A. Hogan, Jr.Managing Director612 303-6380

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