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Top News in PLASTICS AND PACKAGING

M&A Quarterly

For additional information or inquiries, please contact one of our team members:

www.pmcf.com

PLASTICS & PACKAGING THIRD QUARTER 2014

John D. Hart 248.223.3468 [email protected]

Matt G. Jamison 248.223.3368 [email protected]

Ryan R. Shuchman 248.603.5372 [email protected]

Scott S. Rohlig 248.603.5232 [email protected]

About PMCFP&M Corporate Finance (“PMCF”) is an investment banking firm, focused ex-clusively on middle market transactions, with professionals in Chicago, Detroit, and across the globe through Corporate Finance International associates. Our dedicated Plastics and Packaging Group has deep industry knowledge and cov-ers a wide range of processes including thermoforming, sheet and film extrusion, blow molding, injection molding, and resin and color compounding. Offering a breadth of advisory services, the Plastics and Packaging Group has helped clients worldwide meet their sale, acquisition, financing, and strategic growth objectives.

Investment Banking Services:

• Mergers & Acquisitions

• Sales & Divestitures

• Capital Raising

• Sale Planning

CHICAGO225 W. Washington Street, Suite 2700Chicago, IL 60606312.602.3600

DETROITTwo Towne Square, Suite 425Southfield, MI 48076248.603.5300

has acquired

PMCF Transaction Announcements

Packaging: Health and BeautyInjection Molding

Company Sale to International Buyer

Packaging: IndustrialStructural Foam

Private Equity Divestiture

Packaging: FoodInjection Molding

Strategic Acquisition Advisory

pmcf.com

M&A Quarterly – Plastics & Packaging

2

Transaction activity in the third quarter of 2014, totaling 64 deals, represented an overall decline in deal volume relative to the first two quarters of the year which averaged 88 deals. Strategic ac-quisitions were a factor as they trended lower in Q3 after strong Q1 and Q2 activity. Yet overall, with 240 plastic and packaging deals recorded through Q3 2014, the year is still slightly over the same time period last year which featured 236 transactions.

Year-to-date Q3 growth can be attributed to a small increase in strategic buyer activity, while financial acquisitions (including both platforms and add-ons) is exactly flat between the compari-son periods. If strategic buyer M&A remains at this percentage of overall activity through the remainder of 2014, currently at 67.5%, it would mark the third year in a row of increased deal flow for these buyers. This data appears to reflect their increas-ing focus on aggressively pursuing attractive M&A opportunities.

Key M&A trends through Q3 2014 for plastics and packaging included the following:

• With M&A slightly up, buyers were active across nearly all segments. Blow molding, injection mold-ing, film, and resin & compounding all reflected increased deal flow, while sheet and thermoform-ing is down significantly versus 2013. The sheet and thermoforming M&A trend reflects a relative scarcity of available targets, which is partially the result of the significant historical consolidation in this attractive segment.

• The blow molding segment continues to attract strategic and financial buyers with deal activity up 31% versus 2013.

• The healthy M&A market has supported an increase in injection molding transactions as well. A key driver is automotive deals which have more than doubled through the third quarter of 2014, versus last year, illustrating the more positive outlook buyers have for the industry.

• PMCF’s index of plastic and packaging publicly traded companies remained at the elevated levels first reached at the end of Q3 2013. However, average EBITDA and revenue multiples for the last 4 quarters have remained relatively flat.

2014’s positive M&A environment was further highlighted by numerous marquee deals which oc-curred in Q3 2014:

• Bemis Co. Inc.’s (NYSE:BMS) sale of its pressure-sensitive materials business, MACtac, to private equity firm Platinum Equity, LLC for $170 million

• Ply Gem Holdings Inc.’s (NYSE:PGEM) acquisition of Simonton Windows from Fortune Brands Home & Security (NYSE:FBHS) for $130 million

• Huhtamaki Oyj’s (HLSE:HUH1V) acquisition of Positive Packaging Industries Plc for approximately $336 million

• Private equity firm Sun Capital Partners’ packaging platform Coveris Holdings’ acquisition of flex-ible print specialist Learoyd Packaging Ltd.

• Inteplast Group, Ltd’s acquisition of its main competitor in corrugated plastic sheet, Coroplast, Inc.

• CHS Capital’s sale of Dura-Line Corp. to Mexichem SAB de CV (BMV:MEXCHEM) for $630 million

2014’s activity appears to reflect positive momentum between active buyers and sellers that could allow the year to meet or exceed 2013’s level of deal making. If 2014 does reach 2013’s total deal count, it would mark the fifth year in a row of robust plastics and packaging M&A. This is a direct result of strategic buyers increasing their percentage of completed deals and supporting the healthy environment; however; private equity also remains highly focused on the industry with investment funds continuing to hold record levels of uninvested capital.

PMCF continues to believe that buyer demand out-strips available plastic and packaging targets for sale; a trend reflected in our sale process man-dates. These “seller’s market” conditions may rea-sonably be expected to continue through 2014, and potentially 2015, if buyers remain at their current levels of activity. Shareholders within plastic and packaging, should take note of the attractive valu-ations available in today’s M&A market if they are considering a potential exit in the near future.

Strategic Financial Add-On Financial Platform

220

55

72

347

235

68

79

382

213

56

59

328

158

38

40

236

162

41

37240

199

61

80

340

266

60

67

393

0

50

100

150

200

250

300

400

350

Q3 YTD ‘13 Q3 YTD ‘1420102009 2011 2012 2013

Num

ber

of D

eals

Q3 2014 Market Summary & Outlook

Q3 YTD ‘14

Q3 YTD ‘13

Flexible

Rigid Packaging

15%

Industrial8%

Consumer 3%

Bottles3%Resin

21%BuildingProducts

9%

FlexiblePackaging

14%

Custom Molding25%

Closures2%

Sector‘13 – ’14

Change

Injection Molding

Blow Molding

Film

Resin/Color & Compounding

Sheet & Thermoforming

Specialty

Total

201230

110

68

62

32

80

382

22

86

60

68

38

54

328

13

64

39

49

28

43

236

6%

27%

16%

21%

12%

18%

100%

17

72

42

51

16

42

240

7%

30%

17%

21%

7%

18%

100%

% of Total

% of Total2013

% Change

Q3 YTD‘14

Q3 YTD‘13

4

8

3

2

-12

-1

4

31%

13%

8%

4%

-43%

-2%

2%

Source: P&M Corporate Finance, Company Reports

Flexible

Rigid Packaging

8%

Industrial15%

Consumer1%

Bottles5%

Resin18% Building

Products6%

FlexiblePackaging

14%Custom Molding

30%

Closures3%

Transactions by Product Segment


PMCF

3

Global Plastic Packaging M&A

Trends in M&A:• Packaging related M&A volumes were slightly down through the first three quarters of 2014, versus the same period in 2013,

driven primarily by lower Q3 volumes• Strategic transactions in Q3 2014 were a significant driver of the decline in Q3 YTD ‘14 transactions versus the comparison period,

as only 11 deals occurred as compared to the 20 deals recorded in Q3 2013• Rigid packaging deals accounted for the highest percentage of the overall decline for packaging transactions, with the transaction

mix for these deals shifting from 46% through Q3 YTD ‘13 to 27% through Q3 YTD ‘14

Transactions by Buyer Type Transactions by End Market

0

20

40

60

80

100

120

140

65

53

118

Q3 YTD ‘13

66

48

114

2013

71

47

118

Q3 YTD ‘14

52

28

80

2010

40

30

2011

80

51

131

2012Strategic Financial

Num

ber

of D

eals

70

Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

36

19

11

-

11

-

2

1

80

38

16

10

-

5

1

-

-

70

Q3 YTD ‘14Q3 YTD ‘13

• September 2014 — London’s Financial Times newspaper reported that New Zealand-based private equity firm Rank Group has hired JPMorgan to sell its Closure Systems International (CSI) packaging platform. CSI, based in Indianapolis, IN, is an inter-national manufacturer of plastic and aluminum closures with more than 30 manufacturing sites around the world. This news follows the release of Rank Group’s Reynolds Group Holdings Ltd. unit’s 6K filing in which they announced strategic reviews of CSI, Evergreen Packaging Group, and SIG Combibloc. Reynolds noted in the filing that the reviews “may result in a decision to sell some or all of those businesses, although no decision has been made at this time to do so.” Reynolds reported its closures business had $169 million in adjusted EBITDA for the year ended Dec. 31, 2013. In the previous year the business’s EBITDA was higher at $187 million. The Financial Times report estimated that CSI and Evergreen may be sold for about $4 billion, with CSI going for more than $1.5 billion.

• August 2014 — According to a new report by the Flexible Packaging Association (FPA), the United States market for flexible pack-aging is expected to grow at an annualized rate of 3.8 percent in 2014. The Linthicum, MD-based trade group recently released its annual State of the Flexible Packaging Industry Report. In the new report, the group noted that the U.S. flexible packaging industry had previously achieved a 2.8 percent growth rate, becoming a $27.2 billion industry in 2013. Driven by positive end market and industry trends, FPA’s forecasted 3.8 percent growth rate for 2014 would bring revenue in the U.S. flexible packaging sector to $28.2 billion.

Featured Sector Transactions September 2014 — Wisconsin-based Bemis Co. Inc. (NYSE:BMS) announced it has agreed to sell its pressure-sensitive materi-als business, MACtac, to California-based private equity group Platinum Equity, LLC for $170 million. The deals follows Bemis’ sale of its paper packaging division to Hood Packaging Corp. earlier this year. According to Bemis CEO William Austen, “Bemis is now positioned to dedicate all of our resources to accelerating strategic growth in our core flexible packaging business.” MACtac reported annual sales of $553 million and has manufacturing sites in Scranton, PA; Columbus, IN; San Luis Potosi, Mexico; Soignies, Belgium, and Genk, Belgium. Platinum Equity, based in Los Angeles, also owns BWAY Corp., a manufac-turer of rigid plastic and metal containers.July 2014 — Huhtamaki Oyj (HLSE:HUH1V), based in Espoo, Finland, entered into an agreement to acquire Positive Packaging Industries’ operations in India and the United Arab Emirates from Enpee Industries Plc for approximately $336 million. Posi-tive Packaging Industries will become part of Huhtamaki’s Flexible Packaging business segment. Acquiring Positive Packag-ing’s operations in India and UAE brings approximately $300 million in annual sales to Huhtamaki along with 9 manufactur-ing sites and 2,500 employees. Huhtamäki CEO Jukka Moisio noted, “It further enhances our position in India and provides us with much improved access to the fast growing markets of Africa and Middle East.”

Flexible

PublicAcquirer

22%

PrivateAcquirer

43%

PE to PE6%

Private Equity(PE)29%

Flexible

PublicAcquirer

26%

PrivateAcquirer

31%

PE to PE13%


Q3 YTD ‘13 Q3 YTD ‘14

Buyer Type

RigidFlexibleBottlingCaps & Closures

Total

37 33 6 4

80

46%41%8%5%

100%

# % Packaging # % Packaging 19 33 11 7

70

27% 47% 16% 10% 100%


Packaging Transaction Detail

Sources: P&M Corporate Finance, Plastics News, Company Reports, London Financial Times, Flexible Packaging Association

pmcf.com


4

Global Injection Molding M&A

Trends in M&A:• Global injection molding M&A activity of 18 transactions in Q3 2014 trended lower, after 27 deals were posted in each of the first

two quarters of 2014, but overall deal volume is still on pace to potentially exceed levels recorded in 2013• Deals involving acquisition targets in the automotive end market continue to drive the increase in year-over-year activity, with 21

deals recorded through Q3 YTD ‘14 versus 8 deals recorded through Q3 YTD ‘13• Foreign buyers have accounted for the slight increase in YTD volumes versus the prior year, as transactions involving U.S. buyers

are flat through the first three quarters of 2014 versus the prior year

Industry News:• September 2014 — Nypro, Inc., acquired by Jabil Circuit (NYSE:JBL) for $665 million last year, recently completed an expansion

into a new medical device manufacturing facility in Clinton, MA. The 200,000 sq. ft. facility features Class 8 clean room molding and assembly areas, a metrology lab, and a machine shop. It also has 60,000 sq. ft. of injection molding space that will have four machines at the start, but has room for about 60 machines in total. Production is due to start in late October or early November. Courtney Ryan, Senior Vice President of Jabil Circuit Inc. and CEO of Nypro Inc., said the new company has been growing since Jabil’s acquisition in July 2013. In addition to this recent expansion, the company has made big investments in its facilities in Ireland, Mexico, China, and Mebane, NC.

• August 2014 — Citing two unnamed sources, Thomson Reuters Group’s PEHub.com reported PA-based private equity firm Gra-ham Partners is ready to sell septic tank maker Infiltrator Systems Inc. Graham acquired the CT-based business in November 2005 as a portfolio company, and has since made several add-on acquisitions including NJ-based ICC Technologies LLC last December, which designs and manufactures similar products for synthetic, aggregate drainage systems, and has a new line of injection molded tanks. According to the PEHub.com report, Graham is seeking bids of at least eight times EBITDA.

Featured Sector Transactions September 2014 — Singapore-based injection molder and toolmaker Sunningdale Tech Ltd. (SGX:T35) announced plans to buy First Engineering Ltd. from Australia-based private equity firm Anchorage Capital Partners for $80 million, representing a transaction multiple of 4.7x EBITDA. First Engineering, also based in Singapore, is a manufacturer of precision molds and engineering components for the automotive, consumer/information technology, and health care/medical device sectors. Ac-cording to Sunningdale Tech, the acquisition will provide immediate access to the Indian market and grow the company to combined sales of $507 million with manufacturing operations and sales offices spanning across nine countries. September 2014 — C+N Packaging, Inc. (C+N), of Wyandanch, NY, was acquired by publicly traded PSB Industries (EPA: PSB, PSB), of Annecy, France. PSB is an innovation-driven industrial group with leadership positions in packaging and specialty chemicals. The group reported consolidated revenues of € 257 million in 2013 including over 60% from international sales. PSB has production plants in France, the United States, Japan and Mexico. C+N is a renowned global plastic packaging manufacturer for prestigious beauty customers including Avon, Estée Lauder, and Elizabeth Arden. The Company services its customers via multiple plants in North America (two in the United States and one in Mexico) and in Europe via a facility in Poland. C+N’s international capabilities include mold making, injection molding, assembly, decorating, and metallization. PMCF served as the exclusive financial advisor to C+N.

Sources: P&M Corporate Finance, Plastics News, Company Reports, Thomson Reuters


0

20

40

60

80

100

120

58

52

110

Q3 YTD ‘13

67

39

106

2013

57

29

86

Q3 YTD ’14

44

20

64

2010

49

23

72

2011

70

36

106

2012Strategic Financial

Num

ber

of D

eals

Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

6

11

12

2

12

8

3

10

64

6

17

12

-

10

21

1

5

72


Flexible

PublicAcquirer

27%

PrivateAcquirer

42%

PE to PE3%


Flexible

PublicAcquirer

31%

PrivateAcquirer

37%

PE to PE7%


Q3 YTD ‘13 Q3 YTD ‘14

Buyer Type

U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

24

4

8

36

72

-

24

4

3

33

64

3


Sector Deal Statistics


PMCF

5

Global Film M&A

Trends in M&A:• Film extrusion and conversion deals in the food & beverage industry were down in Q3 2014 relative to Q3 2013, primarily due to

the large number of these transactions in Q3 2013, but are still up through Q3 YTD ‘14 on a year-over-year basis• Financial buyers are slightly more active through the first three quarters of 2014 versus last year, and have accounted for ap-

proximately 10% more of overall global film M&A compared to a year earlier• Deals involving foreign buyers during Q3 2014 were consistent with levels in Q3 2013, but are still up year-over-year due to the

higher number of transactions recorded through H1 2014 versus H1 2013

Sources: P&M Corporate Finance, Plastics News, Company Reports, Bloomberg, PCI Films Consulting Ltd.


Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

22

14

4

-

2

-

-

-

42

Q3 YTD ‘14

16

13

6

-

2

-

1

1

39

Q3 YTD ‘13

Industry News:• September 2014 — Three investment firms are considering making an offer for plastic film maker Klöckner Pentaplast Group

according to Bloomberg. The story, which quotes anonymous sources familiar with the matter, said that buyers may bid up to $2 billion for the company. The report indicated private equity firms Apollo Global Management LLC, Ares Management LP, and Platinum Equity LLC are potential buyers. Klöckner Pentaplast is a Montabaur, Germany-based manufacturer of plastic film for a variety of end markets including pharmaceutical, medical, food & beverage, and cards. CT-based hedge fund Strategic Value Partners acquired Klöckner Pentaplast in June 2012 from NY-based private equity firm Blackstone Group LP for approximately $238 million. In May, news agencies had reported that Strategic Value Partners had hired advisers and expected to receive tenta-tive bids in July. Updating this report, Reuters has recently released another article that Klöckner Pentaplast Group may no longer be for sale.

• September 2014 — Guilsborough, England-based research company PCI Films Consulting Ltd. released a new report on the global nylon film market estimating demand of $1.1 billion. The report also stated that the 2-stage sequential stretching technol-ogy that has been traditionally favored for the production of the material has changed in recent years with end users requiring simultaneous stretching technology to be used to give them more balanced film properties. PCI says the global market consumed 230,000 metric tons of nylon film in 2013 and expects it to grow by 60,000 metric tons in the next year. For the growing demand for balanced films to be met PCI estimates that 25 percent of installed global nylon film capacity will be using the simultaneous stretching technique for production of nylon film by 2018, compared to 16 percent in 2013.

Featured Sector Transactions August 2014 — Boca Raton, FL-based private equity firm Sun Capital Partners’ packaging platform Coveris Holdings, based in Chicago, IL, agreed to acquire flexible print specialist Learoyd Packaging Ltd. for an undisclosed amount. Based in Burnley, England, Learoyd Packaging manufactures flexible packaging for a range of top British retail brands and had $33 million in sales during 2013. Learoyd Packaging represents Coveris’ second acquisition in the UK this summer, following the June pur-chase of St. Neots Packaging Ltd., a manufacturer of plastic film-lined food packaging. Coveris has also invested in increased production equipment and capacity for flexible packaging at its plant in Neuwied, Germany. Coveris now has 64 plants across North America, Europe, the Middle East, and China with global revenues of $2.8 billion.July 2014 — Specialty films converter Transilwrap Co. Inc., based in Franklin Park, IL and a portfolio holding of NY-based pri-vate equity firm The Jordan Company, L.P., agreed to acquire Ireland-based MetPro Group, which makes protective packaging products that prevent moisture and corrosion on materials ranging from plastic and paper to steel and aluminum. Terms of the transaction were undisclosed. MetPro represents the third acquisition for Transilwrap in the past five years. Transilwrap also bought Quest Films Inc. in 2009 and InterFilm Holdings Inc. in 2011 and was purchased itself by The Jordan Company late last year.

Strategic Financial

45

23

68

Q3 YTD ‘13

48

27

75

2013

41

19

60

Q3 YTD ‘14

28

11

39

2010

26

16

42

2011

51

27

78

2012

Num

ber

of D

eals

0

10

20

30

40

60

80

50

70

Flexible

PublicAcquirer

28%

PrivateAcquirer

44%

PE to PE5%


Flexible

PublicAcquirer

26%

PrivateAcquirer

36%

PE to PE7%


Q3 YTD ‘13 Q3 YTD ‘14

Buyer Type

U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

13

3

2

21

39

2

Q3 YTD ‘13

9

2

3

28

42

2

Q3 YTD ‘14


pmcf.com


6

Global Resin and Color & Compounding M&A

Trends in M&A:• M&A activity involving resin suppliers and color & compounders has remained relatively flat year-over-year, but continued to ac-

count for approximately 21% of overall plastics and packaging M&A volumes through the first three quarters of both 2014 and 2013

• After a slight shift in transaction mix among color & compounders and resin suppliers through H1 2014, a higher level of deals involving resin suppliers in Q3 2014 has resulted in a YTD transaction mix consistent with prior period results

• Q3 2014 transaction volume was primarily driven by foreign buyers, who posted 10 deals in the quarter versus 5 deals posted by U.S. buyers, however U.S. buyers have been more active through Q3 YTD ‘14 versus their level of activity through Q3 YTD ‘13

Sector Detail Q3 YTD ‘13

Industry News:• September 2014 — German chemical giant Bayer AG (DB:BAYN) confirmed reports that it is spinning off its MaterialScience plas-

tics group into a separate, publicly-traded company within the next 12 to 18 months. Bayer officials noted that the split would allow the parent company to operate as a life sciences business and an independent MaterialScience business will have better access to capital and greater flexibility. Bayer said in a statement that its supervisory board “unanimously approved” the manage-ment board’s decision. Bayer has not yet stated where the stock in the new company will be traded. Investors have initially reacted favorably to the move, as Bayer’s per-share stock price rose 5 percent to more than $144 on the Frankfurt Stock Exchange’s Xetra platform in the hours following the announcement.

• August 2014 — Clariant International Ltd. (SWX:CLN), a Swiss specialty chemicals company, announced it is building a new masterbatches plant in the greater Sydney area of Australia. The company says that construction on the plant is underway and it is set to open by the end of the calendar year. The plant will serve the Australian market with a range of color and additive mas-terbatches. Mathias Lütgendorf, a member of the executive committee for Muttenz, Switzerland-based Clariant, noted, “[The] Asia Pacific region is one of Clariant’s focal areas for future development. The new Australian masterbatches plant will support our masterbatches business to grow and to increase its customer service focus in the region.” Earlier this year, Clariant also expanded its production of masterbatches and pigments in Tagerang, Indonesia.

Flexible

Color &Compounding

39%

Resin Supplier61%

Flexible

Color &Compounding

41% Resin Supplier59%

Sector Detail Q3 YTD ‘14

Sources: P&M Corporate Finance, Plastics News, Company Reports

Transactions by Buyer Type

Featured Sector Transactions September 2014 — Solvay Specialty Polymers USA LLC, a wholly-owned subsidiary of Belgium-based Solvay SA (ENXTBR:SOLB), agreed to acquire the Ryton-brand polyphenylene sulfide (PPS) business from Chevron Phillips Chemical Co. (NYSE:PSX) for $220 million. The deal includes two PPS production plants in Borger, TX, a pilot plant and R&D labs in Bartlesville, OK, and a compounding plant in Kallo-Beveren, Belgium. Not included in the deal is a compounding plant in La Porte, TX. That plant will continue to toll-compound Ryton for Solvay until production can be moved to other Solvay compounding sites. “The op-portunity presented itself, and Ryton is a good complement to our portfolio,” noted Solvay senior vice president Tom Wood. “It’s a key missing link for us and is a very well-known and respected brand name.”August 2014 — Mexican PVC and specialty chemicals maker Mexichem SAB de CV (BMV:MEXCHEM) announced it has agreed to buy German PVC paste producer Vestolit GmbH from private equity firm Strategic Value Partners LLC (SVP) for $293 million. Vestolit claims to be the only producer of high impact suspension PVC (HIS-PVC) for weather-resistant and energy-efficient windows and also produces alkyl-chlorides used for a variety of chemical and industrial applications. According to SVP, Vestolit’s total installed capacity is 415,000 tons per year and had sales of $638.4 million in 2013. Mexichem, based in Tlalnepantla, Mexico, is Latin America’s largest manufacturer of PVC pipe, vinyl resins, and compounds.

0

10

20

30

40

60

80

50

70

42

14

56

44

18

62

52

16

68

39

10

49

35

16

51

58

71

Strategic Financial2013 Q3 YTD ‘13 Q3 YTD ‘142010 2011 2012

13

Num

ber

of D

eals

Flexible


PE to PE6%

Public Acquirer

47%

Private Acquirer

33%

Flexible Public

Acquirer44%Private

Acquirer25%

PE to PE6%


Q3 YTD ‘13 Q3 YTD ‘14

Buyer Type

U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

18

5

2

26

51

2

Q3 YTD ‘14

14

5

1

29

49

-

Q3 YTD ‘13



PMCF

7

Global Sheet and Thermoforming M&A

Trends in M&A:• Sheet extrusion and thermoforming deals have declined through Q3 YTD 2014, recording only 16 deals versus the 28 that oc-

curred in the same period a year before. This decline does not reflect lower buyer interest, but rather the relative scarcity of avail-able companies to acquire

• Acquisitions involving both private equity and strategic buyers have declined through the first three quarters of 2014, falling by 4 and 8 deals respectively compared to the first three quarters of 2013

• Food & beverage transactions in the sheet and thermoforming sector rebounded after a slow start to 2014, posting three deals in Q3 2014 following a first half in which only one deal was recorded in the segment

Industry News:• September 2014 — The Society of Plastics Engineers held its annual Thermoforming Conference in Schaumburg, IL and drew over

800 attendees, according to Jim Arnet, conference chairman. The conference took place over four days from September 15-18 at the Schaumburg Hotel and Convention Center and included technical presentations, a parts competition, and a trade show with 86 exhibitors. Arnet said attendees came from 18 countries and included approximately 300 first-time attendees.

• August 2014 — Denmark-based R. Faerch Plast A/S, one of Europe’s leading producers of plastic containers for the food industry, is set to double production capacity in the United Kingdom by early 2015 following the planned installation of an additional extru-sion line and associated thermoformers at its Durham, England-based manufacturing facility. As part of the expansion, Faerch Plast will install a range of additional associated production equipment such as robotic packing systems, cooling systems, and compressors. The plant will also benefit from an extension to boost warehouse capacity and a 50 percent increase in headcount primarily focused on production personnel. Joe Iannidinardo, Managing Director at Faerch Plast UK, noted, “The investment en-ables us to efficiently service our UK customers with an enhanced portfolio of products in a facility built to the highest standards of quality and efficiency,”

Sources: P&M Corporate Finance, Plastics News, Company Reports, Society of Plastics Engineers


Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

11

5

2

2

2

4

2

-

28

Q3 YTD ‘13

4

7

2

-

1

-

2

-

16

Q3 YTD ‘14

Featured Sector Transactions August 2014 — Inteplast Group, Ltd., based in Livingston, NJ, acquired its main competitor in corrugated plastic sheet, Vance-burg, KY-based Coroplast, Inc., for an undisclosed amount. As part of the transaction, Inteplast acquired corrugated sheet plants in Vanceburg, KY and Granby, QC, as well as Coroplast’s headquarters in Chicago, IL. Coroplast makes a broad line of corrugated plastic sheet and related laminates for the graphics, reusable packaging, agriculture, automotive, and construction end markets. Coroplast was owned by Vancouver, BC-based conglomerate Jim Pattison Group, which bought the company in 1990. “Coroplast brings geographic diversity and increased capabilities to our group,” noted Inteplast Group President John Young.July 2014 — Thermoformed medical packager Nelipak Corp., owned by WI-based private equity firm Mason Wells, announced it has agreed to acquire Phoenix, AZ-based custom packager Flexpak Corp. Terms of the transaction were undisclosed. Flex-pak is a manufacturer of custom thermoformed trays, clamshells, and blisters for the medical, consumer, and food markets. The business will operate under the name Nelipak Healthcare Packaging. Based in the Netherlands, Nelipak has more than 500 employees worldwide and plants in Cranston, RI, the Netherlands, Ireland, and Costa Rica. This represents Mason Wells first add-on acquisition for its Nelipak platform, which it acquired from Sealed Air Corporation (NYSE:SEE) in December 2013.

0

5

10

15

20

25

30

40

35

21

11

32

20

12

32

22

16

38

17

11

28

9

7

16

13

12

25

Num

ber

of D

eals

Strategic Financial20132010 2011 2012 Q3 YTD ‘13 Q3 YTD ‘14

Flexible


PE to PE21%

Public Acquirer

18%

Private Acquirer

43%

Flexible


Public Acquirer

25% Private Acquirer

31%

Q3 YTD ‘13 Q3 YTD ‘14

Buyer Type

U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

6

-

2

8

16

1

Q3 YTD ‘14

9

3

-

16

28

-

Q3 YTD ‘13


pmcf.com


8

Global Blow Molding M&A

Trends in M&A:• After a historically lower 2013, blow molding activity is trending higher in 2014 with the potential to exceed 2013 levels• M&A activity within the food & beverage end market continued to drive transaction volume within blow molding, accounting for

2 of the 3 blow molding deals posted in Q3 2014• U.S. acquirers have been more active in the blow molding segment through Q3 YTD ’14 versus Q3 YTD ’13, doubling their buying

activity

Sources: P&M Corporate Finance, Plastics News, Company Reports


Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

8

4

3

-

-

2

-

-

17

Q3 YTD ‘14

4

5

2

-

2

-

-

-

13

Q3 YTD ‘13

Industry News:• July 2014 — In a recent presentation, Melbourne-based Pact Group (ASX: PGH) announced it is seeking acquisitions, particularly

in the Asian markets. Pact is a manufacturer of rigid plastic packaging for the food and beverage, personal care, household con-sumer, and industrial markets. It reported sales of $532.8 million for the first half of its 2014 fiscal year and has 62 manufacturing plants across Australia, New Zealand, China, the Philippines, and Thailand. The company noted it is especially focused on the potential acquisition of Indonesian plastics packaging company Dynapack Asia Pte. Ltd. Dynapack is owned by Pact non-executive chairman Raphael Geminder’s private company Geminder Holdings and Indonesia’s Hambali family and had sales of $220.7 mil-lion last year. In May, Dynapack added to its operations when it acquired a Chinese packaging company.

• July 2014 — A new blow molding and filling technology called LiquiForm has been announced that uses pressurized consumable liquid instead of compressed air to form plastic containers. According to the LiquiForm Group, by combining the bottle forming and filling processes into one step, the technology eliminates numerous manufacturing steps, significantly reducing cost and waste. LiquiForm Group is the business development group representing DISCMA — a joint venture between Amcor Ltd. (ASX:AMC) and Sidel S.A. Full scale commercialization of the LiquiForm technology is currently expected to occur by 2018.

Featured Sector Transactions September 2014 — Custom molder Exo-s Inc., based in Quebec, Canada, announced it has bought an injection and blow mold-ing operation in San Juan del Rio, Querétaro, Mexico from the Sebre Group. Exo-s primarily supplies injection and blow-molded automotive components such as engine covers, thermal ducting systems, and coolant reservoirs. The company also molds com-ponents for agriculture, all-terrain vehicles, toys, and household appliances. It employs more than 700 in the United States, Canada, and Mexico. The Mexico plant is its fourth site. “Mexico was a logical sequence after the recent investments we have made to increase the capacity of our American and Canadian operations,” noted Exo-s President and CEO Emmanuel Duchesne.August 2014 — Private equity firm Oak Hill Capital Partners, based in Stamford, CT, agreed to buy Chicago, IL-based rigid packaging distributor Berlin Packaging LLC for $1.43 billion from private equity firm Investcorp Bank. Oak Hill is investing in partnership with Berlin Packaging’s current management team, led by Chairman and CEO Andrew Berlin. The company sup-plies plastic, metal, and glass containers and closures and has more than 90 North American sales and warehouse locations. Berlin Packaging’s services include design, worldwide sourcing, warehousing and logistics, and capital financing. In 2013, Berlin Packaging reported sales of nearly $800 million.

0

5

10

15

20

25

30

35

11

11

22

7

6

13

10

7

17

17

10

27

10

8

18

15

15

30

Num

ber

of D

eals

Strategic Financial20132010 2011 2012 Q3 YTD ‘13 Q3 YTD ‘14

Flexible Private Equity(PE)31%

Private Acquirer

54%

PE to PE 15%

Flexible


Public Acquirer

35%Private Acquirer

24%

PE to PE17%

Q3 YTD ‘13 Q3 YTD ‘14

Buyer Type

U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

6

-

1

10

17

4

Q3 YTD '14

2

1

-

10

13

-

Q3 YTD '13



PMCF

9

Additional Global Specialty Sector Activity

Trends in M&A:• Flat year-over-year trends experienced through H1 2014 continued through Q3 2014 for deals involving specialty plastic process-

ing types, including rotational molding, foam, pipe & tube, profile extrusion, and composites• Transactions involving acquisition targets in the construction end market supported Q3 2014 volume, representing approxi-

mately 58% of deals recorded in the period• The shift in mix from financial to strategic buyers continued through Q3 YTD ’13, with strategic buyers involved in 9 of 12 Q3 2014

specialty transactions

FEATURED SECTOR TRANSACTIONSPipe & TubeAugust 2014 — Mexichem SAB de CV (BMV:MEXCHEM) announced its second acquisition for the third quarter of 2014 with its agreement to buy Dura-Line Corp. from Chicago, IL-based private equity firm CHS Capital for $630 million. Dura-Line is a manufacturer of high density polyethylene conduit, duct, and pressure pipe for telecommunications and data communications. The company is based in Knoxville, TN, employs approximately 1,500 people, and is one of the largest plastic pipe extruders in North America. It has manufacturing operations in the United States, Mexico, South Africa, India, Oman, Dubai, and the Czech Republic. “We think Dura-Line will be our springboard into the United States,” noted Antonio Carilla Rule, Managing Director of Mexichem. “Our focus is not to seek more acquisitions, although we don’t want to close the door entirely.”August 2014 — Westlake, OH-based Nordson Corp. (NasdaqGS:NDSN) agreed to acquire Los Angeles, CA-based Avalon Labora-tories Holding Corp. for $180 million. Avalon Laboratories manufactures catheters and medical tubing products for cardiology, pulmonology, and related applications. The company will become part of Nordson’s Advanced Technology Systems segment. It has about 400 employees across its Los Angeles headquarters and manufacturing plant in Guaymas, Mexico. Michael F. Hilton, Nordson President and CEO, said that Avalon “brings Nordson another stream of high value recurring revenue and further reduces our exposure to more cyclical end markets.”

Profile ExtrusionSeptember 2014 — Dallas, TX-based middle market private equity firm Highlander Partners LP reached an agreement to acquire Versatex Building Products LLC, a Pittsburgh, PA-based manufacturer of cellular PVC trim. Financial terms of the deal were not disclosed. Versatex makes cellular PVC building products, such as trim board, soffit, and moldings for the new construction and repair/remodel markets in the United States and Canada. Jeff Hull, Highlander’s Managing Partner, said, “We look forward to supporting their vision as being at the forefront of innovation in the building materials space and [to] continue expanding the company’s presence throughout the United States and abroad as cellular PVC continues to gain adoption and take share in the market.”August 2014 — Building materials manufacturer Ply Gem Holdings Inc. (NYSE:PGEM), based in Cary, NC, announced it is buying Simonton Windows from Deerfield, IL-based Fortune Brands Home & Security (NYSE:FBHS) in a $130 million deal. Columbus, OH-based Simonton manufactures vinyl windows and patio doors at three U.S. factories and has over $300 million in annual sales. Ply Gem will operate Simonton Windows as a stand-alone business unit and keep its management team in place after the deal closes. The transaction, which represents a multiple of approximately 10x EBITDA, also includes all assets of SimEx, a vinyl and PVC foam extrusion operation in West Virginia.

FoamJuly 2014 – Boyd Corporation, a Modesto, CA-based manufacturer of specialty material and sealing agents, has purchased Evonik Industries’ (DB:EVK) Solimide low-density polyimide foams business. Originally designed by NASA, Solimide is the dom-inant foam for the defense industry as well as for mission-critical insulation applications in both the wide-body and regional aircraft markets. The Solimide Foam business will continue to operate under the Solimide brand and Evonik’s manufacturing site in Magnolia, AR and administrative facility in Allen, TX will be added to Boyd’s global footprint. “Acquiring Evonik’s So-limide foam business represents a unique opportunity for our company to obtain a high-performing technology that positions us to realize significant growth within key commercial aerospace, defense, and building infrastructure segments,” noted Mitch Aiello, Boyd’s President and CEO.

Source: P&M Corporate Finance, Plastics News, Company Reports


Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

1

14

4

17

2

1

3

-

42

Q3 YTD ‘14

-

10

4

20

5

1

1

2

43

Q3 YTD ‘13

010 20

304050

60

100

30

24

54

23

20

43

33

942

57

29

86

32

28

60

53

27

80

Num

ber

of D

eals

Q3 YTD ‘132013 Q3 YTD ‘142010 2011 2012Strategic Financial

4050

60

pmcf.com


10

PMCF Plastics & Packaging Index S&P 500 Index

Note: Chart highlights relative stock price return

Sep- 12 Sep - 14Dec - 12 Mar-13 Jun-13 Sep- 13 Dec - 13 Mar- 14 Jun-1490%

110%

130%

150%

170%

100%

120%

140%

160%

PMCF Plastics & Packaging Index

PMCF Plastics & Packaging Index Valuation

• The PMCF Plastics & Packaging Index has outperformed the S&P 500 Index since the third quarter of 2012, delivering relative stock price returns of approximately 142% versus 137% through the third quarter of 2014

• Strong stock market valuations for publicly traded plastics companies continued in Q3 2014, reaching the sixth consecutive quar-ter trading above 9.0x EV/EBITDA based on the Index average

Revenue MultipleAverageMedian

EBITDA MultipleAverageMedian

0.8x0.8x

7.0x7.2x

Q3 ‘12

1.0x1.0x

8.4x8.2x

0.9x0.8x

7.4x7.3x

Q4 ‘12

1.1x1.1x

9.1x8.7x

Q1 ‘13

1.2x1.2x

9.4x9.3x

Q2 ‘13 Q3 ‘13

1.2x1.1x

9.5x8.8x

1.2x1.1x

9.3x8.8x

Q4 ‘13

1.2x1.1x

9.4x8.8x

Q1 ‘14

1.2x1.2x

9.4x9.2x

Q2 ‘14 Q3 ‘14

Private Equity Investments

No. of Deals Disclosed Deal Value

Num

ber

of D

eals

0

Dea

l Val

ue ($

in B

illio

ns)

$0$50$100$150$200$250$300$350$400$450$500

2,000 4,000 6,000 8,000

10,000 12,000 14,000 16,000 18,00020,000

12,063

2009

10,342

2010

14,315

2011

16,126

2012

18,133

2013

16,542

13,931

Q3 YTD ‘14

Q3 YTD ‘13

Deal Volume Capital Invested

Num

ber

of D

eals

0

Dea

l Val

ue ($

in B

illio

ns)

2009 2010 2011 2012 2013 Q3 YTD ‘14

Q3 YTD ‘13

1,605

2,3182,484

2,742 2,791

2,036 2,097

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

500

1,000

1,500

2,000

2,500

3,000

• Overall middle market M&A activity has experienced increases in both deal volume and total transaction value through the first three quarters of 2014 versus the same period a year earlier

• Private equity investment declined in Q3 2014, recording 588 deals totaling $110.1 billion, following three consecutive quarters in which deal volume exceeded 700 and totaled over $120 billion. However, YTD 2014 activity is up

U.S. M&A Activity — Deals < $500M

U.S. Middle Market Transaction Summary (All Industries)

Source: Capital IQ, Pitchbook, and PMCF Estimates

Note: Multiples based on most recent data available as of printingSource: Capital IQ

*Includes all disclosed transaction with at least one U.S. party

plastics.pmcf.com

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P&M Corporate Finance, LLC will seek to provide investment banking and/or other services to one or more of the companies mentioned in this market overview.

P&M Corporate Finance, LLC, and/or the analysts who prepared this market update, may own securities of one or more of the companies mentioned in this market overview.

The information provided in this market overview was obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not to be construed as legal, accounting, financial, or investment advice. Information, opinions, and estimates reflect P&M Corporate Finance, LLC’s judgment as of the date of publication and are subject to change without notice. P&M Corporate Finance, LLC undertakes no obligation to notify any recipient of this market overview of any such change.

The charts and graphs used in this market overview have been compiled by P&M Corporate Finance, LLC solely for illustrative purposes. All charts are as of the date of issuance of this market overview, unless otherwise noted.

The PMCF Plastics Index may not be inclusive of all companies in the plastics industry and is not a composite index of the plastic industry sector returns. Index and sector returns are past performance which is not an indicator of future results.

This market overview is not directed to, or intended for distribution to, any person in any jurisdiction where such distribution would be contrary to law or regulation, or which would subject P&M Corporate Finance, LLC to licensing or registration requirements in such jurisdiction.

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