2015, quarter 1 european paper and packaging update...welcome to pöyry capital’s first european...

Welcome to Pöyry Capital’s first European quarterly Paper and Packaging newsletter. We plan to publish the newsletter at the end of each quarter and intend to cover the key transactions announced each quarter in the European Paper and Packaging sector.

Pöyry Capital has acquired a high degree of industry insights and transaction experience in sectors that usually are not associated with the Pöyry Group, in particular non cellulose packaging and packaging converting. We hope that this newsletter is a natural extension of the industry capabilities that we have as a company acquired during the last few years.

European Paper and Packaging Update

PÖYRY CAPITAL’S QUARTERLY EUROPEAN PAPER AND PACKAGING UPDATE

2015, QUARTER 1

4TH QUARTER 2014During the 4th Quarter of 2014, approximately 30 paper and packaging transactions were announced in Europe, representing an announced transaction value of approximately EUR 7.5bn. During this quarter, two of the largest transactions in the paper and packaging space during the last few years were announced.

THE SALE OF SIG COMBIBLOC BY REYNOLDS GROUP HOLDINGS (ANNOUNCED 24TH NOVEMBER 2014)Onex Corporation, a Canadian headquartered Private Equity company, announced the acquisition of SIG Combibloc Group AG for a transaction value of EUR 3.575 billion with an additional amount of up to EUR 175 million payable based on the financial performance in 2015 and 2016. SIG Combibloc is one of the largest beverage carton packaging companies in Europe with additional manufacturing operations in China, Brazil and the Middle East. The valuation consideration represented an Enterprise Value / EBITDA multiple of approximately 8.9x (including earn-out, 8.5x excluding earn-out). In 2013 SIG Combibloc generated sales of approximately EUR

1,680 million. This transaction represents a successful exit by the Reynolds Group Holdings Limited from the aseptic beverage carton market.

SIG Combibloc focuses on the manufacturing of aseptic packaging cartons, an area where the dominant packaging player is Tetra-Pak.

During the last few years a number of new beverage carton converting players have aggressively entered the market (including Greatview Asceptic Packaging, IPI and other Chinese beverage carton converts) creating a more competitive environment.

One area of further growth in this market is expected to lie in aseptic packaging products in those emerging markets where cold-chains are not fully established, particularly for dairy products, as well as use of this type of packaging for solid food packaging (soups, sauces).

SIG Combibloc has a system of proprietary SIG machines installed at their customer sites around the world. Many other beverage carton converting companies do not offer this integrated model.

“The valuation levels achieved in the announced transactions for both SIG Combibloc and Constantia Flexibles are among the highest multiples paid for food related packaging companies in Europe during the last few years. The consumer packaging sector’s limited cyclicality and resilience (and the availability of financing) continue to attract financial investors to the sector”

Cele MoncayoManaging Director

Source: Capital IQ, Company Information, Onex, Reuters, Wendel, Reynolds Group Holdings


THE SALE OF CONSTANTIA FLEXIBLES BY ONE EQUITY PARTNERS (“OEP”) (AN-NOUNCED 23RD DECEMBER 2014)Wendel Group, a French headquartered investment group, announced the acquisition of Constantia Flexibles for a transaction value of EUR 2,300 billion. Constantia Flexibles is one of the largest European flexible packaging companies focusing on food and pharma packaging and labels with a growing exposure to Latin America, India and North America. The consideration represented an Enterprise Value / 2014E EBITDA multiple of approximately 9.0x.

Wendel stated that an important area of focus for Constantia would be entering emerging markets through acquisitions.

The heritage of Constantia is in the aluminium foil sector. In recent years the demand for other types of flexible packaging material has grown at a faster pace, with a wide variety of polymer films doing especially well.

The acquisition of Constantia Flexibles represents the most substantial divestiture of OEP from the portfolio of aluminium and packaging assets acquired from Constantia Packaging in 2009. The remaining asset owned by OEP from the original Constantia Packaging is Duropack, a corrugated packaging company focused on Eastern and South Eastern Europe.

“DO PAPER MAKERS IN EUROPE ACHIEVE AN ATTRACTIVE ROCE?” A senior packaging executive told us recently that no European paper / packaging board maker is achieving a sufficiently attractive ROCE for him to consider making a paper / board acquisition.

After this discussion, we went back to our desk and did some additional research and came out with the following conclusions:

• On average the peer group in specialty paper and printing and writing grades of paper making companies have had a ROCE below 5% for the last 5 years. This appears to be driven largely by a general decline in paper demand;

• Containerboard and paperboard packaging companies have in general achieved ROCE around 7%; and

• During the last five years most other packaging converting companies have had ROCE substantially superior to those in the paper and board manufacturing area.

However, we have noted some exceptions to the above trend that we believe are relevant here:

• In general, conversions from idle printing and writing grades paper machines into packaging based board making machines can achieve ROCE substantially higher than those achieved by current established paper and packaging companies; and

AVERAGE EBIT MARGIN VS AVERAGE ROCE (2010 TO LTM)

Source: Capital IQ, Company Information

(4%)

0%

4%

8%

12%

16%

(5%) 0% 5% 10% 15%

Aver

age

RO

CE

%

Average EBIT margin %

Speciality Paper Commodity PaperCartonboard ContainerboardRigid Plastics Flexible PlasticsGlass and Metal PulpPaper/ Packaging Machine Mfr. Distributors

• A number of niche paper manufacturing companies are able to achieve ROCE of a substantially higher magnitude than those players currently established in the market

The returns being achieved during the last five years by paper and board makers have not been sufficient to cover their cost of equity. However, attractive opportunities may exist in selected conversion into packaging paper grades where high ROCE could, in theory, be achievable.


SPECIALITY PAPEROn 10th October Andlinger & Company CVBA announced its intention to make a public offer for Crown Van Gelder N.V. Pöyry Capital is acting as exclusive financial adviser to Crown Van Gelder N.V.

On 20th November Nordic Paper announced that it had a new majority owner (funds advised by Orlando Management AG)

On 13th December Stora Enso announced the sale of its Uetersen mill to Perusa Partners Fund 2

COMMODITY PAPERIn October Cartiera di Galliera S.R.L. acquired La Papeterie de Raon

CARTONBOARD PACKAGINGOn the 4th November Sullivan Street Partners announced the acquisition of Medica Packaging Limited

On 12th November Essentra announced the acquisition of Clondalkin Specialist Packaging Division

On 24th November Onex Corporation announced the acquisition of SIG Combibloc Group AG

On 27th November Multi Packaging Solutions announced the acquisition of Presentation Products Group

CONTAINERBOARDIn October it was announced that Mondi Plc has sold Mondi Packaging Moederbrugg GmbH to Wolfgang Habenberger (a private individual)

On 6th November DS Smith announced that it had acquired Andopack

On 18th November Motion Equity Partners announced that it had, along with Arkea Capital, acquired Cellulose de la Loire SA

On 20th November DS Smith received a binding offer for its paper mill in Nantes, France

On 4th December it was announced that DS Smith had signed a non-binding letter of intent to acquire a further stake in Kaplamin Ambalaj Sanayi ve Ticaret A.S

On 16th December Logson Group announced the acquisition of Scott Packaging (Glasgow) Ltd

RIGID PLASTICSOn 5th November Plastipak Packaging, Inc. announced the acquisition of La Seda de Barcelona’s APPE Packaging Division

On 6th November Moulded Foams announced the acquisition of Peterhead Box Company

On 17th November Ariol Capital acquired Repli SL

On 27th November RPC Group Plc announced the acquisition of Promens Group AS

In December PFF Packaging Group announced the acquisition of Thermopak

FLEXIBLE PLASTICSOn 3rd November Plastics Capital announced the conditional acquisition of Flexipol Packaging Limited

On 4th November CCL Industries Inc. announced the acquisition of Label Connections Ltd

On 22nd November Huhtamaki announced the sale of its films business to DBAG Fund VI, a fund advised by Deutsche Beteiligungs AG

On 3rd December CCL Industries announced its second acquisition this quarter, Druckerei Nilles GmbH

On 23rd December Wendel announced the acquisition of Constantia Flexibles

GLASS AND METALOn 2nd December ADCURAM Group AG announced the sale of Duran Group to One Equity Partners

In December it was announced that Verallia had sold Saint-Gobain Kavminsteklo, ZAO to RATM Holding

On 22nd December it was announced that Vidrala had made an offer to purchase Encirc Limited

MACHINE MANUFACTURERSOn 25th October Masterwork Machinery Co Ltd announced the acquisition of post press packaging assets from Heidelberger Druckmaschinen AG

On 24th November Krones announced the acquisition of a 51% stake in Till GmbH

On 3rd December J.M. Voith GmbH & Co. announced the acquisition of a 24.09% stake in KUKA AG

DISTRIBUTORSOn 22nd December Brenntag announced the acquisition of Fred Holmberg & Co AB

TRANSACTION UPDATE – Q4 2014

0x

3x

6x

9x

12x

FY10 FY11 FY12 FY13 LTM

0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x

15x


0x

3x

6x

9x

12x

15x


Specialty paper

Cartonboard Packaging

Rigid Plastics

Glass and Metal

Paper/ Packaging Machine Manufacturers

Commodity paper

Containerboard

Flexible Plastics

Pulp

Distributors

0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x


0x

3x

6x

9x

12x

15x


0x

3x

6x

9x

12x

15x


Specialty paper

Cartonboard Packaging

Rigid Plastics

Glass and Metal

Paper/ Packaging Machine Manufacturers

Commodity paper

Containerboard

Flexible Plastics

Pulp

Distributors

ON AVERAGE MOST PAPER AND PACKAGING COMPANIES IN EUROPE ARE TRADING AT RELATIVE VALUATION LEVELS ABOVE THEIR FIVE YEAR AVERAGE

THE EV/EBITDA MULTIPLES OF FLEXIBLE PACKAGING AND PULP COMPANIES ARE APPROXIMATELY 30% TO 40% HIGHER THAN THE LEVELS IN 2010 AND 2011

EV/LTM EBITDA

Source: Mergermarket, Capital IQ, Company Information, Pöyry


PÖYRY CAPITAL HAS LONGSTANDING EXPERIENCE ACROSS THE PAPER AND PACKAGING SECTORS

Pöyry Capital’s Quarterly European Paper and Packaging Update

1

Cartonboard Packaging Containerboard

Specialty Paper Commodity Paper

Pöyry Capital has longstanding experience across the paper and packaging sectors

Rigid Plastics Flexible Plastics

Distributors Pulp

Pending

Exclusive Financial Advisor to Crown Van Gelder

Intends to make apublic offer for

October 2014

Exclusive Financial Advisor to the Supervisory Board and Management

of Crown Van Gelder

Pöyry Capital provided a fairness opinion in relation to Andlinger & Company’s intended public offer for

Crown Van Gelder

Q1 2014

Financial Advisor to the lending banks

Pöyry Capital acted as financial advisor to the

lending banks of a leading paper producer and

distributor during the restructuring process

December 2014

Exclusive Trustee to Sonoco-Alcore joint venture

Have divested 100% of shares in Ahlstrom Cores AS Norway

to

August 2011

Financial Advisor to the lending banks of Myllyoski

has been acquired by

and

February 2014

Exclusive Financial Advisor to Graphic Packaging

has agreed to acquire

December 2012



Beer and Beverage Packaging Business

December 2012



October 2013

Exclusive Financial Advisor toH2 Equity Partner

has agreed to divest

September 2007

Financial Advisor to Stora Enso

have divested

Stora Enso North America Inc

to

January 2014

Exclusive Financial Advisor to Irving Place Capital and Oaktree Capital

Management

and

have sold

Q1 2014

Exclusive Financial Advisor

Middle Eastern PackagingCompany

Pöyry Capital conducted a rigorous target search

for global flexible packaging targets

Exclusive Financial Advisor toUPM-Kymmene Oyj

UPM-Kymmene Oyj

have sold

to

Investor Group led by 3i Group

Financial Advisor toUPM-Kymmene Oyj

UPM-Kymmene Oyj

have sold

to

Bemis Company, Inc

March 2013

Exclusive Financial Adviser to ENCE Energia y Celulosa

Has agreed to divest its Uruguayan Operations to

a U.S. institutional fund with forestry operations in Latin

America

Exclusive Financial Advisor toStora Enso Oyj

have divested

Celulose Beira Industrial (Celbi) SA

to

August 2006 March 2001

Exclusive Financial Adviserto the Investor Group

Československá obchodní banka, a.s.P.I.F. a.s – 1. Privatizační investiční fond

První investiční společnost, a.s.TARPA Securities B.V.

Triton Development Fundrepresented by

Quorum Pro, a.s.have sold 93.6% of the shares of

toHeinzel, Bunzl Beteiligungs- und

Liegenschaftsverwaltungs GesmbH

Financial Advisor to Rexam PLC

has divested

to

November 2009

Financial Advisor to Sun European Partners LLP


European Rigid Plastic Consumer Goods

December 2010 August 2003 August 2002

Exclusive Financial Advisor toStora Enso Oyj

have acquired

Private Shareholders and IFC

December 2004

March 2008

Exclusive Financial Advisor to Altor

has acquired

from

April 2005

Exclusive Financial Advisor to Papyrus AB

have acquired

from

International Paper

September 2005

Exclusive Financial Advisor to Papyrus AB

have acquired

from

Private Shareholders

June 2007

Exclusive Financial Advisor to M-real Corporation

have divested

M-real Petöfi Nyomda Kft

to

Cele MoncayoManaging Director+44 207 479 [email protected]

Pöyry Capital Limited5-6 Cork StreetLondon W1S 3NX, UK

www.poyrycapital.comwww.poyry.com

DisclaimerPöyry reserves all rights to this publication. No part of this publication may be reproduced or used in any form without the prior written consent of Pöyry. This publication is partly based on information that is not within Pöyry’s control. Pöyry does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained in this publication. Pöyry expressly disclaims any and all liability arising out of or relating to the use of this publication. This publication may contain projections which are based on assumptions subjected to uncertainties and contingencies. Because of the subjective judgments and inherent uncertainties of projections, and because events frequently do not occur as expected, there can be no assurance that the projections contained herein will be realized and actual results may be different from projected results. Hence the projections supplied are not to be regarded as firm predictions of the future, but rather as illustrations of what might happen.

Photos: colourbox.com

2015, quarter 1 european paper and packaging update...welcome to pöyry capital’s first european...

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