Packaging M&As Continue

Published: October 01, 2006, By By Bill Hornell Mesirow Financial

CHICAGO, IL — The past few months have seen a wave of private equity-backed merger and acquisition transactions in the packaging industry. These transactions cut across almost all segments of consumer packaging:

• Texas Pacific Group purchases the consumer packaging business of Smurfit-Stone Container Corp. (folding cartons, labels, flexible packaging). Purchased business is renamed Altivity Packaging.
• Altivity (backed by Texas Pacific Group) purchases Field Container Co. (folding cartons).
• JW Childs Assoc. purchases a majority interest in WS Packaging Group (labels).
• Milestone Partners purchases the Outlook Group (cartons, labels, and flexible packaging).
• Prudential Capital Group purchases a majority interest in Ampac Packaging (flexible packaging).
• Apollo Management purchases Tyco's Plastics, Adhesives, and Coated Products businesses (flex-pack).

This activity is being fueled by the literally hundreds of billions of dollars that have been raised by private equity groups in recent years. When this equity is combined with the sea of debt that's available from banks, insurance companies, and hedge funds, the purchasing power is quite impressive.

Because of this purchasing power, valuations have increased. Middle-market companies now are selling for an average purchase price multiple in excess of 6.5x EBITDA.

In addition to valuation increases, industries are being transformed. It will be very interesting to see the effects of combining two consumer packaging powerhouses such as Smurfit-Stone's consumer business and Field Container. These types of transactions represent more than just financial engineering. Hopefully the effects will be positive for all stakeholders.

For more information contact Bill Hornell at 312/595-6176, or visit www.mesirowfinancial.com.