WPA Mergers & Acquisition Conference
Global Consolidation Among Plastics Processors:
Lead, Follow, or Get Out of the Way
September 10, 2013
Norwalk, California
www.blaige.com
Blaige & Company
Pure Focus. Premier Value.SM
 Blaige & Company’s Pure Focus has resulted in its position as the brand leader and
only specialist investment bank of its kind.
 Our advantage is rooted in two unique and significant capabilities:
 Application of Extensive CEO - Level Strategy and Operations Experience
 Plastics, Packaging, Chemicals Only.
Blaige & Company’s senior advisory professionals have personally
managed, owned, or visited over 600 plastic, packaging, and chemical
operations in over 40 countries, and have completed nearly 200 valueenhancing transactions exclusively in plastics, packaging, and chemicals.
© Copyright 2013 All Contents Blaige & Company
2
Blaige & Company
Global Operating Experience, Exclusive Focus, Unmatched Results
has acquired
P & O Packaging, Ltd.
a portfolio company of Pinecrest Capital Inc.
Exclusive representation of
P & O Packaging, Ltd.
by Blaige & Company L.L.C.
© Copyright 2013 All Contents Blaige & Company
3
Agenda
Mega Trends in Plastics M&A
I.Globalization Driving Growth
II.Segment Analysis:
 Key End Market (Packaging)
 Supply Chain (Machinery/Materials)
 Processors (5 Segments)
III.Big Getting Bigger, Widening “Gap”
IV.Sellers’ Market-Quality/Size Matter
V.Lead, Follow, or Get Out of the Way (Strategy)
VI.Recommendation to Plastics Processors & Conclusion
© Copyright 2013 All Contents Blaige & Company
4
I. Globalization Driving Growth
5
I. Globalization Driving Growth
 Plastics Deal Volume Way Up in Past Twelve Years:
Plastics M&A Volume Doubled from 2001-2013F
Average = 403 deals
600
536
480
500
417
400
300
215
200
100
369
359
96
72
48
41
71
50
96
107
2001
2002
125
64
88
85
70
103
126
198
426
425
447
138
118
92
140
468
468
94
77
162
169
212
222
2011
2012 2013F
430
71
159
140
155
115
148
172
2003
2004
274
203
223
201
2005
2006
2007
248
259
2009
2010
204
0
Industrial
© Copyright 2013 All Contents Blaige & Company
Packaging
2008
Raw Materials
Source: Blaige & Co. Proprietary Research
6
I. Globalization Driving Growth
 Plastics Deal Volume Way Up in Past Twelve Years:
Plastics M&A Volume Doubled from 2001-2013F
 Fastest Growth: International (BRIC Geographies)
2001
2013F
U.S./
International
28%
U.S./
International
21%
International/
International
40%
US Only
32%
215 Transactions
© Copyright 2013 All Contents Blaige & Company
International/
International
45%
US Only
34%
430 Transactions
Source: Blaige & Co. Proprietary Research
7
I. Globalization Driving Growth
 Plastics Deal Volume Way Up in Past Twelve Years:
Plastics M&A Volume Doubled from 2001-2013F
 Fastest Growth: International (BRIC Geographies)
 Strategic Motivations: 84% of Deals are Strategic in Nature
(Strategic Buyers & Financial Add-ons)
2001
2013F
Strategic
Buyers
69%
Strategic
Buyers
85%
Financial
Platform
16%
Financial
Platform
10%
Financial
Add-On
15%
Financial
Add-On
5%
215 Transactions
© Copyright 2013 All Contents Blaige & Company
430 Transactions
Source: Blaige & Co. Proprietary Research
8
I. Globalization Driving Growth
 Strategic Consolidation Changing Competitive Landscape
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research -Plastics News January 25, 2013
9
II. Segment Analysis
10
II. Segment Analysis – Key End Market (Packaging)
Plastic Packaging
Deal Activity
200
Average = 124 deals
180
159
160
138
140
140
41
52
72
106
67
63
98
60
60
50
40
28
20
11
17
2001
Key Trends 2013
95
78
87
80
0
80
103
59
155
140
115
100
169
126
125
120
162
19
66
74
74
66
53
31
2002
2003
2004
2005
2006
Flexible
2007
62
43
2008
2009
79
2010
2011
58
2012 2013F
Rigid
 Packaging has been a bright spot of M&A activity in recent years
 Packaging represents 36% of overall plastics M&A activity in 2013
 Flexible/Rigid packaging both very attractive niches
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
11
II. Segment Analysis - Supply Chain (Machinery)
Machinery & Tooling
Deal Activity 60
Average = 28 deals
49
50
40
36
32
20
10
30
27
30
17
17
2004
2005
30
30
2010
2011
33
9
0
2003
2006
2007
2008
2009
2012
2013F
Headline Deals
CCMP Capital Advisors/Milacron (Avenue Capital Group)
Milacron/Mold-Masters (3i Group) - $968mm
Berkshire Partners and OMERS/Husky (Onex) - $2.1b
Onex/KraussMaffei (Madison Capital Partners) - $732mm
Onex/Davis-Standard (Hamilton Robinson) - $189mm
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
12
II. Segment Analysis - Supply Chain (Materials)
Resins, Colorants
& Compounding
Deal Activity
120
Average = 76 deals
96
100
80
85
72
84
82
75
70
64
60
94
93
88
48
41
40
20
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013F
Headline Deals
Clariant/Sud Chemie - $2.6b
SK Capital/Clariant AG’s non-core operations - $550mm
PolyOne/ColorMatrix (Audax) - $486mm
Mexichem/PolyOne Corp.'s PVC resin assets - $250mm
A. Schulman/Network Polymers - $50mm
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
13
II. Segment Analysis - Processors
Film & Sheet
Deal Activity
100
Average = 71 deals
92
91
90
83
80
74
66
58
60
50
30
31
70
54
62
58
60
63
21
23
21
21
2010
2011
2012
2013F
43
56
41
33
20
10
59
45
45
40
77
76
74
66
70
84
22
12
9
12
12
16
2001
2002
2003
2004
2005
0
Headline Deals
23
2006
Industrial
31
33
2008
2009
17
2007
Packaging
 Berry IPO in 2012 - $5b; acquired in 2006 for $2.25b (Apollo and Graham Partners)
 Constantia Flexibles [Prospective IPO] (One Equity Partners)/Global Packaging Corp.;
Spear Group; Parikh Packaging (minority stake)
 Sun Capital combined Kobusch Group, Britton Group, Paragon Print & Packaging
Group, PACCOR, and InteliCoat to form Exopack Holdings Sarl [Prospective IPO]
(>2.5b sales)
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
14
II. Segment Analysis - Processors
Film & Sheet
Deal Activity
Continued
100
Average = 71 deals
91
83
80
74
66
70
50
30
59
70
45
45
31
54
62
58
60
63
21
23
21
21
2010
2011
2012
2013F
43
56
41
33
20
10
77
66
58
40
84
76
74
60
22
12
9
12
12
16
2001
2002
2003
2004
2005
0
Headline Deals




92
90
23
2006
Industrial
31
33
2008
2009
17
2007
Packaging
Mondi/Nordenia (Oaktree) - $781mm
Wind Point/Hilex Poly (TPG); Argotec
Hilex Poly (Wind Point)/Clondalkin - $98.4mm
Inteplast/Nina Plastics; Vifan; Salerno Plastics Films; Pitt Plastics; P&O Packaging;
Trinity Packaging; Minigrip (ITW)
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
15
II. Segment Analysis - Processors
Injection Molding
Deal Activity
100
Average = 71 deals
92
91
90
83
80
74
66
58
60
50
31
30
59
70
45
45
40
77
76
74
66
70
54
84
62
58
60
63
21
23
21
21
2010
2011
2012
2013F
43
56
41
33
20
22
10
12
9
12
12
16
2001
2002
2003
2004
2005
0
23
2006
Industrial
31
33
2008
2009
17
2007
Packaging
Headline Deals
Platinum Equity/BWAY (Madison Dearborn) - $1.2b
BWAY/Ropak Packaging (Linpac Group) - $265mm
Odyssey/Pexco (Sawmill) - $247.5mm
Pexco (Odyssey)/Spectrum Plastics (Spell); Scandia Plastics
Silgan Holdings/Portola Packaging (Wayzata) - $266mm
Jabil Circuit/Nypro - $665mm
Flextronics/RIWISA AG
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
16
II. Segment Analysis - Processors
Blow Molding
Deal Activity
30
Average = 18 deals
28
26
24
25
24
26
23
21
20
15
15
10
11
10
8
8
2001
2002
14
5
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013F
Headline Deals




Rank-Reynolds/Graham Packaging - $4.5b
Bain Capital/CCC (Vestar) - $775mm; Madras Packaging; Roffe Container
Graham Partners/Scandia Plastics
GS Capital/Plastipak Packaging (minority stake)
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
17
II. Segment Analysis - Processors
Thermoforming
Deal Activity
30
Average = 14 deals
25
25
23
19
20
15
10
16
9
3
5
6
11
8
2
6
4
3
3
2002
2003
2004
0
2001
16
15
15
10
8
6
17
8
7
2
9
5
2005
3
3
2006
2007
Industrial
13
12
12
7
14
2008
8
2009
6
5
2010
11
10
2012
2013F
2
2011
Packaging
Headline Deals
Dart Container/Solo Cup (Vestar) - $1b
One Equity Partners/minority stake in Grupo Phoenix
Sonoco/Tegrant (Metalmark) - $550mm
Penda Corp. (Resilience and Littlejohn & Co.)/Fabri-Form
Olympus/Waddington North America (Seven Mile Capital Partners)
Waddington North America (Olympus)/Par-Pak
Wembly Enterprises/Universal Plastics
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
18
II. Segment Analysis – Processors
Pipe, Profile
& Tube Extrusion
Deal Activity
Average = 56 deals
90
83
80
74
70
65
59
60
51
50
69
2011
2012
63
48
41
40
30
70
63
22
20
2001
2002
20
10
0
2003
2004
2005
2006
2007
2008
2009
2010
2013F
Headline Deals
Ply Gem Industries (Post-IPO)/Mitten, Inc. (Graham Partners) - $79.3mm
CHS Capital/Dura-Line (Audax); Polypipe (Halifax Group)
Westlake Chemical Corp./CertainTeed’s PVC pipe business (Saint-Gobain) - $175mm
Advanced Drainage Systems (American Securities)/Quality Culvert; Intel & Pipe Protection
Infiltrator Systems (Graham Partners)/Advanced Drainage Systems’ septic chamber assets
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
19
III. Big Getting Bigger, Widening the “Gap”
20
III. Big Getting Bigger, Widening the “Gap”
 Summary:
58% of 2001’s Top 50 Plastics Processors have Sold / Merged in Past
Twelve Years; Consolidation Active Across All Segments
41% Eliminated; 17% Changed Ownership; 58% Merged/Sold
Consolidation of 2001's Top 50 Companies
Sector
Eliminated
Sold
Blow Molding
48%
22%
Injection Molding
56%
12%
Pipe, Profile & Tubing
36%
26%
Film & Sheet
44%
18%
Thermoforming
44%
10%
Labels
40%
12%
Adhesives & Sealants
18%
18%
Average
41%
17%
© Copyright 2013 All Contents Blaige & Company
Total
70%
68%
62%
62%
54%
52%
36%
58%
Source: Blaige & Co. Proprietary Research
21
III. Big Getting Bigger, Widening the “Gap”
Packaging Industry Global Consolidation
Evolution across packaging types show that Flexible Packaging is due for Significant Consolidation
Segment
Glass Bottles
1980
19 competitors
2012
3 Leaders: 90% share (Anchor,
Owens, St. Gobain)
Food Cans
25 competitors
3 Leaders: 80% share
(Ball, Crown, Silgan)
Beverage Cans
14 competitors
3 Leaders: 80% share (Ball, Crown,
Rexam)
Folding Carton
Packaging (N.A.
Market)
Many competitors
Flexible (Plastic)
Packaging
Many competitors
© Copyright 2013 All Contents Blaige & Company
5 Leaders: 74% share (Graphic
Packaging, MeadWestvaco, Rock-Tenn,
International Paper, Cascades)
4 Leaders: 35% share (Amcor,
Bemis, Printpack, Sealed Air)
Source: Industry Research
22
III. Big Getting Bigger, Widening the “Gap”
M&A Activity in the Global Packaging Markets 2001-2013F
2,300 Packaging Transactions Analyzed by Blaige & Company
Fiber Packaging
Plastic Packaging
Corrugated
24%
Metal and Glass Packaging
Folding Carton
23%
Glass 33%
Rigid 50% Flexible 50%
Integrated
Paper Making
14%
Metal 67%
Label
22%
Diversified
17%
1,610 Transactions
70% of Packaging transactions
© Copyright 2013 All Contents Blaige & Company
621 Transactions
27% of Packaging transactions
69 Transactions
3% of Packaging transactions
Source: Blaige & Co. Proprietary Research
23
III. Big Getting Bigger, Widening the “Gap”
The Field of PET Resin Supplies Has Decreased From Over 23 to 5 in the Past Three Decades
NAFTA PET RESIN PRODUCER INDUSTRY STRUCTURE & TRENDS
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
OWNERSHIP
GOODYEAR
CELANESE
ROHM&HAAS
KODAK
MANAGEMENT
STYLE
LARGE
FIBER
PUBLIC
HOECHST
ICI
RAW
MATERIALS
TECHNOILOGY
SHELL
WELLMAN
EASTMAN
NAN YA
ASIAN
DUPONT
TIEPET
KOSA
PRIVATE
M&G
FOREIGN
KOCH IND
DAK
VORIDIAN
(ALFA)
LARGE SCALE
STARPET
INVISTA
ENTREPRENEURIAL
EASTMAN
PTA FOCUS
MTR Technology
INDORAMA
SELENIS
INDORAMA VENTURES
© Copyright 2013 All Contents Blaige & Company
RATIONALIZATION
CONSOLIDATION
Source: John Maddox/The Packaging Conference 24
III. Big Getting Bigger, Widening the “Gap”
 Leaders: 58% of 2001’s Top 50 U.S. Companies Have Merged or
Sold; Consolidation Active Across All Segments
 Small Fighting Harder: 78% of Plastics Processors Have Sales
of Under $50 Million, While Approximately 84% Have Sales
Under $100 Million
Small
(Sales <
$50M)
78%
Mid
(Sales
$50M $100M)
6%
Large
(Sales
$100M $500M)
13%
Mega
(Sales >
$500M)
3%
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
25
III. Big Getting Bigger, Widening the “Gap”
Access to Capital: Provides a Size Advantage (3.4 times Larger)
Consolidation Survivors – Benefit of Capital Access (millions)
600
$505
500
400
300
200
$147
100
0
Limited Access to Capital
© Copyright 2013 All Contents Blaige & Company
Greater Access to Capital
Source: Blaige & Co. Proprietary Research
26
III. Big Getting Bigger, Widening the “Gap”
Hierarchy: Leaders, Followers & Others
Top Consolidators
(“Leaders”)
• 10-20% of universe
• Rapidly gaining share
• Aggressive acquisitions and
divestitures
• Market domination via best
Static Participants
(“Others”)
• 60-80% of universe
• Share erosion
• Mergers and selective
acquisitions
• Pursue niche leadership
Consolidatees
(“Followers”)
•
•
•
•
10-20% of universe
Rapidly losing share
Restructuring and divestitures
Sell at maximum Price
acquisitions, selective
divestitures
© Copyright 2013 All Contents Blaige & Company
27
IV. Sellers’ Market - Quality/Size Matter
28
IV. Sellers’ Market - Quality/Size Matter
 Capital Availability: Overhang shows tenfold increase
Private Equity Overhang
600
500
$432 billion
($ millions)
400
300
266
252
204
200
147
142
100
56
90
79
100
113
2011
2012F
51
44
0
2001
2002
2003
2004
2005
2006
Capital Overhang
© Copyright 2013 All Contents Blaige & Company
2007
2008
2009
2010
Capital Raised
Source: Pitchbook Data, Inc.
29
IV. Sellers’ Market - Quality/Size Matter
 Sellers’ Market: Valuation multiples are back to near record
levels, Valuation multiples average: 7.8x EBITDA
Private Equity Buyout Purchase Price Multiples (Deal Size/EBITDA)
10.0
9.0
8.5
9.0
6.9
7.0
5.3
4.0
8.0
8.2
7.3
7.1
5.9
5.0
4.0
8.7
7.7
8.0
6.0
8.5
5.8
4.0
4.9
4.1
4.2
4.7
3.8
3.5
3.3
2008
2009
2010
4.1
4.7
3.8
3.0
4.5
2.0
1.0
2.1
2.9
2.4
3.2
3.2
2005
2006
4.1
3.2
0.0
2002
2003
2004
2007
2011
2012
Source: PitchbookDebt/EBITDA
(Large Deal Universe)
Equity/EBITDA
EV/EBITDA
© Copyright 2013 All Contents Blaige & Company
Source: Blaige & Co. Proprietary Research
30
IV. Sellers’ Market - Quality/Size Matter
“Smart Money” Locking in Gains
Private Equity Exits at Record Levels
800
Average = 501 deals/year
700
700
600
626
578
524
486
500
374
400
300
219
200
100
0
2007
2008
© Copyright 2013 All Contents Blaige & Company
2009
2010
2011
2012
Source: Pitchbook
2013F
31
IV. Sellers’ Market - Quality/Size Matter
 Capital Availability: Shows tenfold increase
 Sellers’ Market: Valuation multiples are back to near record levels
 Favorable Market Conditions: Corporate and financial sellers
have embraced market conditions; private sellers appear ready to
“jump in” after 12 years of waiting
2001
2013F
Corporate
Divestitures
35%
Corporate
Divestitures
36%
Private
60%
Financial
Divestitures
17%
Private
47%
Financial
Divestitures
5%
215 Transactions
© Copyright 2013 All Contents Blaige & Company
430 Transactions
Source: Blaige & Co. Proprietary Research
32
IV. Sellers’ Market - Quality/Size Matter
 Potential Transaction Options
 Blaige & Company’s experience with the wide variety (8-10) of
partner types/deal structures, outlined below, will give you the
broadest possibility and allow you to chose the structure that
best achieves your goals.
Management
Autonomy
Case Study
Very High Form House; Constantia Multifilm
1
Transaction Structure
MBO/ESOP
2
Financial Partner (Platform)
Very High
Plastic Packaging Technologies
3
International Financial Partner (Platform)
Very High
P&O Packaging
4
Financial Partner (Complementary Add-on)
High
Floeter Flexibles
5
Strategic Partner (Joint Venture)
6
European Strategic Buyer
7
Financial Partner (Competitor Add-on)
8
Domestic Strategic Buyer
9
Asian Strategic Buyer
© Copyright 2013 All Contents Blaige & Company
High/Medium ISO Poly Films
Medium
H.S. Crocker Pharmaceutical Carton Division
Medium/Low Grayling Industries; Dot Packaging Group
Medium/Low Shield Pack
Low
Speci-Gard Medical Packaging; Nina Plastics
Source: Blaige & Co. Proprietary Research
33
V. Lead, Follow or Get Out of the Way
(Strategy)
34
V. Lead, Follow, or Get Out of the Way (Strategy)
 Global Consolidation: expected to continue at an accelerated rate,
further changing the competitive landscape
 “Shocks to the System/Fragile M&A Cycle”: never before seen
permanent game changers for succession planning
 Wars; Technology Bubble
 “September 11th, 2001”
 Global Financial Crisis; Credit Crunch
 Increasing Regulation/Taxes
 Multiple Hurricanes and Tsunamis
 Hyperinflation of Material Prices
 European Union Debt Crisis
 Foreign Competition (Antidumping Action Required)
 CEO’s must develop and effectively execute Consolidation
Plan/Strategies in order to survive and thrive in the future
 Lead (Acquire)
 Follow (Merge)
 Get Out of The Way (Sell, Divest, Recapitalize)
© Copyright 2013 All Contents Blaige & Company
35
VI. Recommendations to
Plastics Processors & Conclusion
36
VI. Recommendations to Plastics Processors & Conclusion
 Plastic Processors Are Advised to Aspire to $100 Million or Greater
Level (Top 16% of Universe per Blaige Study)
 “Institutional Practices” Mandatory for Small/Mid-Size Players to
Access Financing and M&A Markets
 Timing and Preparation are Everything
 Blaige is the Natural Partner for Your Success
 Please Note: Blaige Twelve Year Plastics & Packaging M&A
Consolidation Study (2001-2012) is Now Available for Purchase.
Thank You!
© Copyright 2013 All Contents Blaige & Company
37
Contact Information
Thomas E. Blaige: tblaige@blaige.com
CHICAGO:
One Magnificent Mile
980 North Michigan Avenue, Suite 1080
Chicago, IL 60611
312-337-5200, Extension 201
MIAMI:
Espirito Santo Bank Plaza
1395 Brickell Avenue, Suite 800
Miami, FL 33131
305-290-4650
© Copyright 2013 All Contents Blaige & Company
38
WPA Mergers & Acquisition Conference
Global Consolidation Among Plastics Processors:
Lead, Follow, or Get Out of the Way
September 10th, 2013
Downey, California
www.blaige.com