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Global Packaging Consolidation: Lead, Follow, or Get Out of the WayLead, Follow, or Get Out of the Way
September 27, 2011 Las Vegas, Nevada
Page 2
Over the past decade how many of the top 50 companies in Over the past decade how many of the top 50 companies in each of the major packaging segments have been eliminated or each of the major packaging segments have been eliminated or have had a change in ownership?have had a change in ownership?
a.a.5%5%
b.b.10%10%
c.c.50%+50%+
Answer: C On average, 56% of the top 50 companies since 2001 have been eliminated or changed ownership.
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 3Objectives for You – How to “Win”Objectives for You – How to “Win”
DDeeper Understandingeeper Understanding– Of risks, opportunities, and your – Of risks, opportunities, and your situationsituation
Develop a Plan/StrategyDevelop a Plan/Strategy– Lead, Follow, or Get Out of the – Lead, Follow, or Get Out of the WayWay
Survive and ThriveSurvive and Thrive– There are winners and losers in every – There are winners and losers in every dealdeal
Today’s presentationToday’s presentation-- To assist each participant on a personal, -- To assist each participant on a personal, professional and corporate level to maximize potential in an professional and corporate level to maximize potential in an increasingly challenging business environment.increasingly challenging business environment.
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 4
Blaige & Company’s Pure Focus has resulted in its position as the largest specialty investment bank of its kind.
Our advantage is rooted in two unique and significant capabilities: Strategic and operational approach (rather than
financial/transactional) Plastics, packaging, and chemicals only.
Pure Focus. Premier Value.SM
Blaige & Company’s senior advisory professionals have personally managed, owned, or visited over 600 plastic, packaging, and chemical operations in 40 countries and have completed over 150 value-enhancing transactions in plastics, packaging, and chemicals.
Page 5
has acquired the pharmaceuticalfolding carton division of
Exclusive representation of H.S. Crocker Co., Inc.
by Blaige& Company L.L.C.
has acquired
Exclusive representation of P & O Packaging, Ltd.
by Blaige& Company L.L.C.
P & O Packaging, Ltd.a portfolio company of PinecrestCapital Inc.
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Blaige & Company Blaige & Company Global Operating Experience, Exclusive Focus, Unmatched ResultsGlobal Operating Experience, Exclusive Focus, Unmatched Results
Page 6AAGENDAGENDA
SectionSection
Major Themes Reflected in Packaging M&A in 2011Major Themes Reflected in Packaging M&A in 2011II
Packaging Industry Global ConsolidationPackaging Industry Global Consolidation IIII
M&A Activity in the Global Packaging MarketsM&A Activity in the Global Packaging Markets IIIIII
Packaging Segment Consolidation AnalysisPackaging Segment Consolidation Analysis IVIV
The Art of the Deal: Maximizing Value in M&AThe Art of the Deal: Maximizing Value in M&A VV
TransactionsTransactions
SummarySummary VIVI
Page 7
Major Themes Reflected in Major Themes Reflected in Packaging M&A in 2011Packaging M&A in 2011
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 8
Major Themes Reflected in Packaging M&A in 2011Major Themes Reflected in Packaging M&A in 2011
ConsolidationConsolidation – Transforming Competitive – Transforming Competitive Landscape at All Levels Landscape at All Levels
Regulated MarketsRegulated Markets – Driving Premium Valuations – Driving Premium Valuations
Global Supply ChainGlobal Supply Chain – Consolidation of Vendors – Consolidation of Vendors
Institutional PracticesInstitutional Practices – Required for Funding / – Required for Funding / Growth at All Levels (Including Mid Market)Growth at All Levels (Including Mid Market)
Blaige Ten Year Consolidation StudyBlaige Ten Year Consolidation Study – –Segmentation: “Leaders, Followers, Others”Segmentation: “Leaders, Followers, Others”
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 9
Packaging Industry Packaging Industry Global ConsolidationGlobal Consolidation
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 10
Packaging Industry Global ConsolidationPackaging Industry Global ConsolidationThe “Leaders,” “Followers,” and “Others”The “Leaders,” “Followers,” and “Others”
Top Consolidators (“Leaders”)
Static Participants(“Others”)
Consolidatees(“Followers”)
• 10-20% of universe• Rapidly gaining
share• Aggressive
acquisitions and divestitures
• Market domination via best acquisitions, selective divestitures
• 60-80% of universe• Share erosion• Mergers and selective
acquisitions• Pursue niche
leadership
• 10-20% of universe• Rapidly losing share• Restructuring and
divestitures • Sell at maximum
Price
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Packaging Industry Global Consolidation
Page 11
Packaging Industry Global ConsolidationPackaging Industry Global ConsolidationEvolution across packaging types show that Flexible Packaging is due for Significant Consolidation
SegmentSegment 19801980 20112011
Glass BottlesGlass Bottles 19 competitors19 competitors 3 Leaders: 90% 3 Leaders: 90% share share (Anchor, Owens, (Anchor, Owens, St. Gobain)St. Gobain)
Food CansFood Cans 25 competitors25 competitors 3 Leaders: 80% 3 Leaders: 80% shareshare(Ball, Crown, Silgan)(Ball, Crown, Silgan)
Beverage CansBeverage Cans 14 competitors14 competitors 3 Leaders: 80% 3 Leaders: 80% share share (Ball, Crown, (Ball, Crown, Rexam)Rexam)
Flexible Flexible (Plastic) (Plastic) PackagingPackaging
Many Many competitorscompetitors
4 Leaders: 34% 4 Leaders: 34% share share (Amcor, Bemis, (Amcor, Bemis, Printpack, Sealed Air)Printpack, Sealed Air)
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 12
Summary—Over 50% of Top 50 Players have Summary—Over 50% of Top 50 Players have Sold / Merged in Past DecadeSold / Merged in Past DecadeSample Below (Averages):Sample Below (Averages): 43% Eliminated; 13% Changed Ownership; 56% 43% Eliminated; 13% Changed Ownership; 56%
Merged/Sold.Merged/Sold. An Additional 20% Have Used M&A as a Strategy.An Additional 20% Have Used M&A as a Strategy.
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Consolidation of 2001's Top 50 Companies
Sector EliminatedChanged
OwnershipTotal
Flexible Packaging
Film & Sheet Top 50 40% 14% 54%
Label Converters Top 50 36% 16% 52%
Rigid Packaging
Blow Molder Top 50 52% 10% 62%
Thermoforming Top 50 44% 12% 56%
Page 13
M&A Activity in the Global M&A Activity in the Global Packaging MarketsPackaging Markets
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 14
Plastic Packaging Fiber Packaging Metal and Glass Packaging
48 Transaction
s 3% of Packaging
transactions
442 Transactions
28% of Packaging transaction
1099 Transactions
69% of Packaging
transactions
M&A Activity in the Global Packaging Markets 2002-M&A Activity in the Global Packaging Markets 2002-2010 2010 1,589 Packaging Transactions Analyzed by Blaige & Company1,589 Packaging Transactions Analyzed by Blaige & Company
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Glass 33%Metal 67%
Corrugated24%
Integrated / Paper Making
14%
Diversified17%
Label22%
Folding Carton23%
Page 15
2002-2010: plastic packaging deals more than tripled from 50 to 159 (average 122).• 2002-2005: majority flexible packaging deals. • 2006-2009: majority rigid packaging deals.• 2010: deals were evenly split between flexible and rigid.
Global Plastic Packaging M&A ActivityGlobal Plastic Packaging M&A Activity
Source: Blaige & Co.
M&A Activity in the Global Packaging Markets M&A Activity in the Global Packaging Markets Plastic Packaging Accounts for nearly Plastic Packaging Accounts for nearly 30%30% of All Plastics Deals of All Plastics Deals
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Average = 113
3166 74 74 66 53 43
63 7919
59 41 52 72 87
60
8080
0
30
60
90
120
150
180
2002 2003 2004 2005 2006 2007 2008 2009 2010Rigid Flexible
50
125115
126138 140
103
143159
Page 16
M&A Activity in the Global Packaging Markets 2002-M&A Activity in the Global Packaging Markets 2002-201020101,589 Packaging Transactions Analyzed by Blaige & Company1,589 Packaging Transactions Analyzed by Blaige & Company
Source: Blaige & Co. Proprietary Research
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 17
M&A Activity in the Global Packaging Markets M&A Activity in the Global Packaging Markets Global Packaging Geography Profile: Growth in International and Cross-Border Global Packaging Geography Profile: Growth in International and Cross-Border TransactionsTransactions
159 Transactions
2010 Geography2003 Geography
125 Transactions
International / International
52% International / International
58%
International / US13% Internation
al / US18%
US Only24%
US Only35%
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 18
2010 Buyers2003 Buyers
M&A Activity in the Global Packaging Markets M&A Activity in the Global Packaging Markets Plastic Packaging: Strategic and Add-On Acquisitions -- 84% of Deal ActivityPlastic Packaging: Strategic and Add-On Acquisitions -- 84% of Deal Activity
125 Transactions 159 Transactions
Financial Platform
16%
Financial Add-On
18%
Strategic Buyers
66%
Financial Platform
22%
Financial Add-On
14%
Strategic Buyers
64%
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 19
Packaging Segment Packaging Segment Consolidation AnalysisConsolidation Analysis
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 20
Source: Blaige & Company
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Thermoforming
Average = 13 Deals
3 4 3 3 5 3 3
9 85
62
16
8 2
12
7
6 8 12
0
5
10
15
20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Industrial Packaging
6
19
11
7
15
10
1516 17
9
Page 21
Thermoforming Headline DealsThermoforming Headline DealsKey Industry Participants Have Been Very Active Key Industry Participants Have Been Very Active
Rohrer acquired by financial sponsor Shoreview IndustriesRohrer acquired by financial sponsor Shoreview Industries
Meadwestvaco divested its Klearfold brand to Hong Kong’s HLP PackagingMeadwestvaco divested its Klearfold brand to Hong Kong’s HLP Packaging
Rank Group acquired Pactiv CorporationRank Group acquired Pactiv Corporation
– Blockbuster deal of 2010 - $6 billionBlockbuster deal of 2010 - $6 billion
– Pactiv acquired PWP Industries; adds successful food thermoforming before it Pactiv acquired PWP Industries; adds successful food thermoforming before it sells itself to Ranksells itself to Rank
Sonoco Products acquired Associated Packaging Technologies (Castle Harlan) for Sonoco Products acquired Associated Packaging Technologies (Castle Harlan) for $120 million$120 million
D&W Fine Pack (Mid Oaks) acquired Tri-City PackagingD&W Fine Pack (Mid Oaks) acquired Tri-City Packaging
Brentwood Industries acquired Reynolds Medical Thermoformed PackagingBrentwood Industries acquired Reynolds Medical Thermoformed Packaging
Oaktree Capital Management and Avenue Capital Group acquired a controlling Oaktree Capital Management and Avenue Capital Group acquired a controlling interest in Tekni-Plexinterest in Tekni-Plex
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 22
Film & Sheet
Source: Blaige & Company
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Average = 67 Deals
13 9 12 12 16 23 1731 33
21
3322
54 62 58 4341
4559
70
0
20
40
60
80
100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Industrial Packaging
31
6674 74
6658
76
92 91
46
Page 23
Film & Sheet Headline DealsFilm & Sheet Headline DealsKey Industry Participants Have Been Very ActiveKey Industry Participants Have Been Very Active
Amcor acquired Alcan’s global pharmaceutical business (80 plants) for $1.95 billion Amcor acquired Alcan’s global pharmaceutical business (80 plants) for $1.95 billion
– Also acquired Alcan Medical Flexibles for $66 million, B-Pack Due (CPP films, Also acquired Alcan Medical Flexibles for $66 million, B-Pack Due (CPP films, Italy) for $60 million, and Ball Corp’s blow molding business for $280 millionItaly) for $60 million, and Ball Corp’s blow molding business for $280 million
Printpack purchased Amcor’s N.C. Medical Flexibles Plant ($30 million sales)Printpack purchased Amcor’s N.C. Medical Flexibles Plant ($30 million sales)
Constantia Flexibles acquired by One Equity Partners; bought Amcor Tobepal in Spain Constantia Flexibles acquired by One Equity Partners; bought Amcor Tobepal in Spain for $118 millionfor $118 million
Berry Plastics acquired Pliant CorporationBerry Plastics acquired Pliant Corporation
India owned Bilcare acquired the Ineos Group global films business for $132 millionIndia owned Bilcare acquired the Ineos Group global films business for $132 million
Inteplast Group acquired Speci-Gard Medical PackagingInteplast Group acquired Speci-Gard Medical Packaging
Sigma Plastics acquired McNeely Plastic Films and Excelsior—Vancouver, representing Sigma Plastics acquired McNeely Plastic Films and Excelsior—Vancouver, representing a total of 26 deals completed since 1990a total of 26 deals completed since 1990
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 24
Source: Blaige & Company
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Blow Molding
Average = 17 Deals
3 1 1 1 18 8
24
7
20 24 22
15 10
25
0
5
10
15
20
25
30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Industrial Packaging
8
24
10
2124 23
1511
26
8
Page 25
Blow Molding Headline DealsBlow Molding Headline DealsKey Industry Participants Have Been Very Active During the Key Industry Participants Have Been Very Active During the Past YearPast Year Graham Packaging (Blackstone Group) acquired Graham Packaging (Blackstone Group) acquired
Liquid Container (Mid Oaks Investments)Liquid Container (Mid Oaks Investments)– Mid Oaks sold Liquid Container for $568 million after Mid Oaks sold Liquid Container for $568 million after
holding the company for 20 yearsholding the company for 20 years
Irving Place Capital acquired Alpha Packaging Irving Place Capital acquired Alpha Packaging (Stonehenge Partners) (Stonehenge Partners)
Embotelladoras Arca SAB de CV acquired Embotelladoras Arca SAB de CV acquired Ecuador Bottling CompanyEcuador Bottling Company– Deal was completed for $345 millionDeal was completed for $345 million
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 26
© Copyright 2011, All Contents Thomas Blaige & Co. LLC Source: Blaige & Company
Label
Average = 40 Deals
15 19 18
4325 23 29 337
9 12
17
2613
1219
0
10
20
30
40
50
60
70
2003 2004 2005 2006 2007 2008 2009 2010Converters Supply Chain
28 30
605251
3641
22
Page 27
Label Headline DealsLabel Headline DealsKey Industry Participants Have Been Very ActiveKey Industry Participants Have Been Very Active
YORK Label (Diamond Castle Holdings) was acquired by Multi-Color YORK Label (Diamond Castle Holdings) was acquired by Multi-Color Corp. $356 millionCorp. $356 million
– York had recently acquired Southern Atlantic Label, marking the York had recently acquired Southern Atlantic Label, marking the company’s 9company’s 9thth acquisition prior to its acquisition by Multi-Color. acquisition prior to its acquisition by Multi-Color.
Private equity group First Atlantic Capital acquired Resource Label Group in Private equity group First Atlantic Capital acquired Resource Label Group in April, 2011.April, 2011.
– In August, 2011 Resource Label acquired Pamco Printed Tape & LabelIn August, 2011 Resource Label acquired Pamco Printed Tape & Label
In 2010 Novacap acquired Smyth CompaniesIn 2010 Novacap acquired Smyth Companies
– The Hickey family previously owned and operated Smyth for more than The Hickey family previously owned and operated Smyth for more than 100 years100 years
– In 2011 Smyth acquired Dow IndustriesIn 2011 Smyth acquired Dow Industries
Financial sponsor Genstar Capital sold Fort Dearborn to KRG CapitalFinancial sponsor Genstar Capital sold Fort Dearborn to KRG Capital© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 28
Source: Blaige & Company
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Fiber Packaging & Materials
Average = 49
43
29
48 4651
29
43
7380
0
20
40
60
80
100
2002 2003 2004 2005 2006 2007 2008 2009 2010
Page 29
Fiber Packaging and Materials Headline DealsFiber Packaging and Materials Headline DealsKey Industry Participants Have Been ActiveKey Industry Participants Have Been Active A&R Carton (AlhstrA&R Carton (Alhström) merged with Flextrus (Accent Equity) to öm) merged with Flextrus (Accent Equity) to
form the €500 million Arch Packagingform the €500 million Arch Packaging
Clondalkin Group PLC Clondalkin Group PLC acquired Catalent Printed Componentsacquired Catalent Printed Components
Rock-Tenn acquiring Smurfit-Stone Container for $3.5 billionRock-Tenn acquiring Smurfit-Stone Container for $3.5 billion
Chesapeake Corporation (Irving Place Capital) acquired Cortegra Group from Chesapeake Corporation (Irving Place Capital) acquired Cortegra Group from Menasha CorporationMenasha Corporation
– In 2010 Chesapeake Corporation acquired leading Polish label and carton In 2010 Chesapeake Corporation acquired leading Polish label and carton manufacturer Cezar SAmanufacturer Cezar SA
Colbert Packaging completed two acquisitions:Colbert Packaging completed two acquisitions:
– Dayton CartonDayton Carton
– Crown Paper BoxCrown Paper Box
Tegrant acquired Dot PackagingTegrant acquired Dot Packaging
Caraustar filed for Chapter 11 bankruptcy Caraustar filed for Chapter 11 bankruptcy © Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 30
Clondalkin Group
CLONDALKIN GROUP
Packaging Segment Consolidation AnalysisPackaging Segment Consolidation AnalysisWatch List: Active Acquirers in Packaging
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 31
Precedent Transaction MultiplesPrecedent Transaction Multiples
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Average 2010Packaging Segment EBITDA Multiples*
Flexibles 7.5xRigid Plastics 7.1xLabels 7.0xFiber 5.3xOverall Average 7.0x*Blaige & Company estimate based on historical data
Page 32
The Art of the Deal:The Art of the Deal:Maximizing Value in M&A Maximizing Value in M&A
TransactionsTransactions
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 33
Maximizing Value in M&A TransactionsMaximizing Value in M&A Transactions Important Quote: The Art Versus the Science of Deal MakingImportant Quote: The Art Versus the Science of Deal Making
““The merger business is 10% financial The merger business is 10% financial analysis and analysis and
90% psychoanalysis”90% psychoanalysis”
– – Financier: The Biography of André Meyer: A Financier: The Biography of André Meyer: A Story of Money, Power, and the Reshaping of Story of Money, Power, and the Reshaping of American BusinessAmerican Business
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 34
Value to Prospective BuyerValue to Prospective Buyer
Maximizing Value in M&A Transactions Maximizing Value in M&A Transactions Franchise Value Can Far Exceed Financial ValueFranchise Value Can Far Exceed Financial Value
M&AValuatio
n
Lowest
Highest
Valuation Multiples
Lowest Multiples
Highest Multiples
Market Share Fold-ins
Key Customer Relationships
Geographic Market Expansion
Complementary Products
New Product Market Beachhead
New Brands or Franchises
New Technologies
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 35
Maximizing Value in M&A TransactionsMaximizing Value in M&A Transactions Documenting and Demonstrating Franchise ValueDocumenting and Demonstrating Franchise Value
Effective Positioning is Critical to Get Full “Credit”Effective Positioning is Critical to Get Full “Credit”
– Detail and document strengths and opportunities Detail and document strengths and opportunities Confidential MemorandumConfidential Memorandum
– Focus on future potential and synergies, Focus on future potential and synergies, not past historynot past history
– Involve key managers – they must “own” the processInvolve key managers – they must “own” the process
– Identify and address the negative issues up frontIdentify and address the negative issues up front
– Prepare a compelling Management Presentation to Prepare a compelling Management Presentation to showcase your team’s vision and capabilitiesshowcase your team’s vision and capabilities
– Absolutely do not miss your budgets during the processAbsolutely do not miss your budgets during the process
Start Now! For each year that you Start Now! For each year that you planplan for a deal you add for a deal you add 10% to your valuation.10% to your valuation.
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 36
Maximizing Value in M&A TransactionsMaximizing Value in M&A TransactionsAlthough Very Tempting, Although Very Tempting, NeverNever Consider a Preemptive Offer Consider a Preemptive Offer
Seller
Buyer
ManagementPresentation
Multiple Offers
LOI Negotiation
Exclusivity to Buyer
Closing
Leve
rag
e
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 37
Maximizing Value in M&A TransactionsMaximizing Value in M&A Transactions A Single Offer is Likely to Converge at 70% of the Final Price A Single Offer is Likely to Converge at 70% of the Final Price Due to Competitive PressureDue to Competitive PressureCompetition = Maximum ValueCompetition = Maximum Value
Serious Indications of Interest(typically 10 data points)
0% 15%
30%
45%
60%
75%
90%
Valuation (% of Final Transaction Price)
Num
ber o
f Buy
ers
Final Transaction Price
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 38
SummarySummary
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 39Objectives for You – How to “Win”Objectives for You – How to “Win”
Today’s presentationToday’s presentation-- To assist each participant on a personal, -- To assist each participant on a personal, professional and corporate level to maximize potential in an professional and corporate level to maximize potential in an increasingly challenging business environment.increasingly challenging business environment.
© Copyright 2011, All Contents Thomas Blaige & Co. LLC
Page 40Summary: Success in ConsolidationSummary: Success in Consolidation
Understand Risks,Understand Risks,Opportunities, and Your Opportunities, and Your SituationSituation
Develop a Plan: Lead, Follow, Develop a Plan: Lead, Follow, or Get Out of the Wayor Get Out of the Way
Execute (the Plan)Execute (the Plan)
Survive and Thrive (Win)Survive and Thrive (Win)
Good Luck!Good Luck!© Copyright 2011, All Contents Thomas Blaige & Co. LLC
www.blaige.com
Presentation to:
Global Packaging Consolidation: Lead, Follow, or Get Out of the WayLead, Follow, or Get Out of the Way
September 27, 2011 Las Vegas, Nevada