global consolidation among plastics processors: lead, follow, or get out of the way september 10,...

Global Consolidation Among Plastics Global Consolidation Among Plastics Processors: Processors:

Lead, Follow, or Get Out of the WayLead, Follow, or Get Out of the Way

September 10, 2013Norwalk, California

www.blaige.com

WPA Mergers & Acquisition WPA Mergers & Acquisition ConferenceConference

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.

Pure Focus. Premier Value.Pure Focus. Premier Value.SMSM

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 value-enhancing transactions exclusively in plastics, packaging, and chemicals.

Blaige & CompanyBlaige & Company

© Copyright 2013 All Contents Blaige & Company 2

Global Operating Experience, Exclusive Focus, Unmatched Global Operating Experience, Exclusive Focus, Unmatched

ResultsResults

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.


Blaige & CompanyBlaige & Company

AgenAgendada

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 I. Globalization Driving GrowthGrowth

5

Plastics Deal Volume Way Up in Past Twelve Years: Plastics M&A Volume Doubled from 2001-2013F

I. Globalization Driving Growth

Source: Blaige & Co. Proprietary Research


96 107148 172 203 223 201

274 248 259212 222 204

71 50

125115

126138

140

103 140159

162 169155

48 41

96 72

8864 85

7092

118

94 7771

215198

369 359

417 425 426447

480

536

468 468430

0

100

200

300

400

500

600

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Industrial Packaging Raw Materials

Average = 403deals

Plastics Deal Volume Way Up in Past Twelve Years: Plastics M&A Volume Doubled from 2001-2013F


Fastest Growth: International (BRIC Geographies)


International/International

40%

U.S./International

28%

US Only32% International/

International45%

U.S./International

21%

US Only34%

2001 2013F

215 Transactions 430 Transactions



Strategic Motivations: 84% of Deals are Strategic in Nature (Strategic Buyers & Financial Add-ons)


Strategic Buyers85%

FinancialPlatform

10%

Financial Add-On

5%

Strategic Buyers69%

FinancialPlatform

16%

Financial Add-On

15%

2001 2013F

215 Transactions 430 Transactions

Plastics Deal Volume Way Up in Past Twelve Years: Plastics M&A Volume Doubled from 2001-2013F Fastest Growth: International (BRIC Geographies)


9


© Copyright 2013 All Contents Blaige & CompanySource: Blaige & Co. Proprietary Research -- Plastics News January 25, 2013

Strategic Consolidation Changing Competitive Landscape

II. Segment Analysis

10

Plastic Packaging

Deal Activity

Key Trends 2013 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

II. Segment Analysis – Key End Market (Packaging)


1731

66 74 74 6653 43

6279

67 63 5811

19

59 4152 72

87

60

78

80 95 10698

28

50

125115

126138 140

103

140

159 162169

155

0

20

40

60

80

100

120

140

160

180

200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Flexible Rigid

Average = 124deals


Machinery & Tooling Deal Activity

Headline DealsCCMP Capital Advisors/Milacron (Avenue Capital Group)Milacron/Mold-Masters (3i Group) - $968mmBerkshire Partners and OMERS/Husky (Onex) - $2.1bOnex/KraussMaffei (Madison Capital Partners) - $732mmOnex/Davis-Standard (Hamilton Robinson) - $189mm

II. Segment Analysis - Supply Chain (Machinery)


9

17 17

27

3230

49

30 30

3633

0

10

20

30

40

50

60

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Average = 28deals


Resins, Colorants & Compounding Deal Activity

Headline DealsClariant/Sud Chemie - $2.6bSK Capital/Clariant AG’s non-core operations - $550mmPolyOne/ColorMatrix (Audax) - $486mmMexichem/PolyOne Corp.'s PVC resin assets - $250mmA. Schulman/Network Polymers - $50mm

II. Segment Analysis - Supply Chain (Materials)


4841

96

72

88

64

85

70

93

84

94

8275

0

20

40

60

80

100

120

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Average = 76deals


Film & SheetDeal Activity

Headline DealsBerry 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)

II. Segment Analysis - Processors


12 9 12 12 1623

17

31 3321 23 21 21

33

22

5462 58 43

41

45

5970

60 635645

31

66

74 74

66

58

76

92 91

83 84

77

0

10

20

30

40

50

60

70

80

90

100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Industrial Packaging

Average = 71deals


15

Film & SheetDeal ActivityContinued


12 9 12 12 1623

17

31 3321 23 21 21

33

22

5462 58 43

41

45

5970

60 635645

31

66

74 74

66

58

76

92 91

83 84

77

0

10

20

30

40

50

60

70

80

90

100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F


Average = 71deals

Headline DealsMondi/Nordenia (Oaktree) - $781mmWind Point/Hilex Poly (TPG); ArgotecHilex Poly (Wind Point)/Clondalkin - $98.4mmInteplast/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

Headline DealsPlatinum Equity/BWAY (Madison Dearborn) - $1.2bBWAY/Ropak Packaging (Linpac Group) - $265mmOdyssey/Pexco (Sawmill) - $247.5mmPexco (Odyssey)/Spectrum Plastics (Spell); Scandia PlasticsSilgan Holdings/Portola Packaging (Wayzata) - $266mmJabil Circuit/Nypro - $665mmFlextronics/RIWISA AG

II. Segment Analysis - ProcessorsInjection

MoldingDeal Activity


12 9 12 12 1623

17

31 3321 23 21 21

33

22

5462 58 43

41

45

5970

60 635645

31

66

74 74

66

58

76

92 91

83 84

77

0

10

20

30

40

50

60

70

80

90

100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F


Average = 71deals


Blow MoldingDeal Activity

Headline DealsRank-Reynolds/Graham Packaging - $4.5bBain Capital/CCC (Vestar) - $775mm; Madras Packaging; Roffe ContainerGraham Partners/Scandia PlasticsGS Capital/Plastipak Packaging (minority stake)



8 8

24

10

21

2423

15

11

26

14

2826

0

5

10

15

20

25

30

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Average = 18 deals


Thermoforming Deal Activity

Headline DealsDart Container/Solo Cup (Vestar) - $1bOne Equity Partners/minority stake in Grupo PhoenixSonoco/Tegrant (Metalmark) - $550mmPenda Corp. (Resilience and Littlejohn & Co.)/Fabri-FormOlympus/Waddington North America (Seven Mile Capital Partners)Waddington North America (Olympus)/Par-PakWembly Enterprises/Universal Plastics



64 3 3

53 3

9 85

2

11 10

3

2

16

82

12

7

6 812

6

1413

9

6

19

11

7

15

10

1516

17

8

2523

0

5

10

15

20

25

30

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F


Average = 14deals


Pipe, Profile & Tube

ExtrusionDeal Activity

Headline DealsPly Gem Industries (Post-IPO)/Mitten, Inc. (Graham Partners) - $79.3mmCHS Capital/Dura-Line (Audax); Polypipe (Halifax Group)Westlake Chemical Corp./CertainTeed’s PVC pipe business (Saint-Gobain) - $175mmAdvanced Drainage Systems (American Securities)/Quality Culvert; Intel & Pipe ProtectionInfiltrator Systems (Graham Partners)/Advanced Drainage Systems’ septic chamber assets

II. Segment Analysis – Processors


22 20

41

5148

6559

83

63

7470 69

63

0

10

20

30

40

50

60

70

80

90

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Average = 56deals


III. Big Getting Bigger, Widening the “Gap”

20

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


Sector Eliminated Sold TotalBlow Molding 48% 22% 70%Injection Molding 56% 12% 68%Pipe, Profile & Tubing 36% 26% 62%Film & Sheet 44% 18% 62%Thermoforming 44% 10% 54%Labels 40% 12% 52%Adhesives & Sealants 18% 18% 36%Average 41% 17% 58%

Consolidation of 2001's Top 50 Companies

© Copyright 2013 All Contents Blaige & Company 21Source: Blaige & Co. Proprietary Research

Packaging Industry Global ConsolidationEvolution across packaging types show that Flexible Packaging is due for Significant Consolidation


Source: Industry Research© Copyright 2013 All Contents Blaige & Company 22

Segment 1980 2012

Glass Bottles 19 competitors 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 5 Leaders: 74% share (Graphic Packaging, MeadWestvaco, Rock-Tenn, International Paper, Cascades)

Flexible (Plastic) Packaging

Many competitors 4 Leaders: 35% share (Amcor, Bemis, Printpack, Sealed Air)

Fiber Packaging

621 Transactions 27% of Packaging

transactions

Corrugated24%

Integrated Paper Making

14%

Diversified17%

Label22%

Folding Carton23%

Plastic Packaging Metal and Glass Packaging

69 Transactions 3% of Packaging

transactions

1,610 Transactions 70% of Packaging

transactions

M&A Activity in the Global Packaging Markets 2001-2013F 2,300 Packaging Transactions Analyzed by Blaige & Company

Glass 33%

Metal 67%


© Copyright 2013 All Contents Blaige & Company 23Source: Blaige & Co. Proprietary Research

1975 GOODYEAR OWNERSHIP

1976 ROHM&HAAS KODAK MANAGEMENT

1977 STYLE

1978 LARGE

1979 FIBER

1980 PUBLIC

19811982198319841985 ICI RAW

1986 MATERIALS

19871988 TECHNOILOGY

1989199019911992 SHELL

1993 WELLMAN

1994 EASTMAN NAN YA ASIAN

1995199619971998 DUPONT

1999 TIEPET PRIVATE

2000 M&G FOREIGN

2001 DAK VORIDIAN

2002 (ALFA) LARGE SCALE

2003 STARPET

20042005 ENTREPRENEURIAL

2006 EASTMAN

2007 PTA FOCUS

2008 MTR Technology

2009 INDORAMA

2010 SELENIS RATIONALIZATION

2011 CONSOLIDATION

201220132014

INDORAMA VENTURES

NAFTA PET RESIN PRODUCER INDUSTRY STRUCTURE & TRENDS

CELANESE

HOECHST

KOSA

KOCH IND

INVISTA


Source: John Maddox/The Packaging Conference

The Field of PET Resin Supplies Has Decreased From Over 23 to 5 in the The Field of PET Resin Supplies Has Decreased From Over 23 to 5 in the Past Three DecadesPast Three Decades


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%


Access to CapitalAccess to Capital: : Provides a Size Advantage (3.4 Provides a Size Advantage (3.4 times Larger)times Larger)

Consolidation Survivors – Benefit of Capital Access (millions)



$147

$505

0

100

200

300

400

500

600

Limited Access to Capital Greater Access to Capital


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

Hierarchy: Leaders, Followers & Others



IV. Sellers’ Market - Quality/Size Matter

28

Capital Availability: Overhang shows tenfold increase Private Equity Overhang Private Equity Overhang

Source: Pitchbook Data, Inc.

IV. Sellers’ Market - Quality/Size IV. Sellers’ Market - Quality/Size MatterMatter

© Copyright 2013 All Contents Blaige & Company

5679

44

90

142

204

266 252

147

51

100 113

0

100

200

300

400

500

600

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F

($ m

illio

ns)

Capital Overhang Capital Raised

$432 billion

29

Sellers’ Market: Valuation multiples are back to near record levels, Valuation multiples average: 7.8x EBITDA

Source: Pitchbook (Large Deal Universe)

Private Equity Buyout Purchase Price Multiples (Deal Private Equity Buyout Purchase Price Multiples (Deal Size/EBITDA)Size/EBITDA)


© Copyright 2013 All Contents Blaige & Company

2.12.9 2.4

3.2 3.2

4.53.8 3.5 3.3

4.13.2

3.8

4.0 4.7

5.3 5.84.0 4.9

4.2 4.74.1

4.1

5.9

6.9 7.1

8.59.0

8.5 8.7

7.78.0 8.2

7.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Equity/ EBITDA Debt/ EBITDA EV/EBITDA

30Source: Blaige & Co. Proprietary Research

© Copyright 2013 All Contents Blaige & Company Source: Pitchbook

Private Equity Exits at Record Levels

31

““Smart Money” Locking in GainsSmart Money” Locking in Gains


578

374

219

486524

626

700

0

100

200

300

400

500

600

700

800

2007 2008 2009 2010 2011 2012 2013F

Average = 501 deals/ year

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



Private 60%

Corporate Divestitures

35%

Financial Divestitures

5%

Private47%

Corporate Divestitures

36%

Financial Divestitures

17%

2001 2013F

430 Transactions215 TransactionsSource: Blaige & Co. Proprietary Research

33

IV. Sellers’ Market - Quality/Size IV. Sellers’ Market - Quality/Size MatterMatter 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.

Transaction StructureManagement Autonomy Case Study

1 MBO/ ESOP Very High Form House; Constantia Multifilm

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) High/ Medium ISO Poly Films

6 European Strategic Buyer Medium H.S. Crocker Pharmaceutical Carton Division

7 Financial Partner (Competitor Add-on) Medium/ Low Grayling Industries; Dot Packaging Group

8 Domestic Strategic Buyer Medium/ Low Shield Pack

9 Asian Strategic Buyer Low Speci-Gard Medical Packaging; Nina Plastics

© Copyright 2013 All Contents Blaige & Company Source: Blaige & Co. Proprietary Research

V. Lead, Follow or Get Out of the Way (Strategy)

34

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)

V. Lead, Follow, or Get Out of the Way V. Lead, Follow, or Get Out of the Way (Strategy)(Strategy)


VI. Recommendations toPlastics Processors &

Conclusion

36

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!

VI. Recommendations to Plastics Processors VI. Recommendations to Plastics Processors & Conclusion& Conclusion


Contact InformationContact InformationThomas E. Blaige: Thomas E. Blaige: [email protected]

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Chicago, IL 60611Chicago, IL 60611

312-337-5200, Extension 201312-337-5200, Extension 201

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1395 Brickell Avenue, Suite 8001395 Brickell Avenue, Suite 800

Miami, FL 33131Miami, FL 33131

305-290-4650305-290-4650


Global Consolidation Among Plastics Global Consolidation Among Plastics Processors: Processors:

Lead, Follow, or Get Out of the WayLead, Follow, or Get Out of the Way

September 10th, 2013Downey, California

www.blaige.com

WPA Mergers & Acquisition WPA Mergers & Acquisition ConferenceConference

global consolidation among plastics processors: lead, follow, or get out of the way september 10,...

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