Klöckner Pentaplast, Tekni-Plex would appeal to private equity

By Frank Esposito
Senior Staff Reporter

Published: September 17, 2013 10:59 am ET
Updated: September 20, 2013 11:33 am ET

AKRON, OHIO — New money could be flowing into the film and sheet market, with film leader Klöckner Pentaplast Group and specialty film maker Tekni-Plex Inc. each searching for a buyer.

Officials with those firms have declined comment, but reports published this summer indicate both firms are on the selling block. Klöckner is based in Montbaur, Germany, and employs more than 3,000 at 17 plants worldwide. Tekni-Plex is based in King of Prussia, Pa., and consists of eight companies, including blister pack film makers Tekni-Films and perishable foods packaging producer Dolco Packaging of Decatur, Ind.

Earlier this summer, Bloomberg News reported that Klöckner owner Strategic Value Partners LLC of Greenwich, Conn., was working with two financial firms to find a buyer. SVP had been one of Klöckner's junior lenders, and acquired the firm from private equity giant Blackstone Group as part of a recapitalization after Klöckner's debt was downgraded. Blackstone had owned Klöckner since 2007, when it paid $1.8 billion to buy the firm from financial investors Cinven LLP and JPMorgan Chase & Co.

Tekni-Plex is being shopped around by Los Angeles-based Oaktree Capital Group LLC and Avenue Capital Group of New York. Those two private equity firms have been majority owners of Tekni-Plex since 2008.

Plastics mergers and acquisitions veteran Bill Ridenour said it's likely that Klöckner and Tekni-Plex will be sold once again to private equity firms rather than to strategic buyers from within the industry. In a Sept. 11 phone interview, Ridenour cited Klöckner's debt issues and the complexity of Tekni-Plex's portfolio as reasons for that expectation.

"I think these firms would have limited appeal to strategic buyers," said Ridenour, president of Polymer Transactions Inc. consulting firm in Newbury, Ohio. "A private equity firm could come in and squeeze out some value by consolidating or taking similar steps."

He cited private equity giants Apollo Group Management LLC and Kohlberg Kravis Roberts & Co. as possible buyers for Klöckner and Tekni-Plex. Apollo combined with packaging leader Graham Partners to buy packaging giant Berry Plastics in 2006. They then took Berry public in 2012. KKR owned plastics machinery leader KraussMaffei AG from 2002-06.

John Hart, another plastics deal veteran, agreed that Klöckner and Tekni-Plex might remain in the hands of private equity.

"There's not a real obvious strategic buyer for either business," said Hart, plastics and packaging group director for P&M Corporate Finance LLC in Southfield, Mich. "You would think that with all the private equity that's out there and because of the interest in the broader plastics space that [Klöckner and Tekni-Plex] would be attractive to other private equity firms."

In the fiscal year ended March 31, Klöckner had sales of almost $1.6 billion, up more than 2 percent over the previous year. In that same 12-month comparison, the firm's pretax profit was up 9 percent to about $215 million.

With annual North American film sales estimated at $600 million, Klöckner placed No. 13 in Plastics News' most recent ranking of the region's film and sheet manufacturers. The 48-year-old firm operates seven film plants in North America, six in Europe, two in South America and two in Asia.

Klöckner bills itself as the world's leading maker of films for pharmaceutical, medical devices, food, electronics and general-purpose thermoformed packaging. It also makes film for printing and specialty applications.

"Klöckner has some good businesses and they're making decent money, but their debt might scare off strategic buyers," Ridenour said.

Tekni-Plex had sales of about $655 million for the year ended June 30, 2012. More recent sales numbers were unavailable. The firm makes multilayer flexible packaging structures at a plant in Flemington, N.J. In late 2012, officials said Tekni-Plex would spend $9 million to upgrade that facility. Other business units operated by the 46-year-old firm include Colorite Compounds and Action Technology, a leading plastic tubing maker.

Selling Tekni-Plex might be a challenge because of its diverse product mix, according to Ridenour. The use of PVC by Colorite and other Tekni-Plex units also might be a deterrent to strategic buyers, he said.

"A lot of companies don't have a place for PVC in their portfolio anymore," Ridenour said. "How do you grow the business and how do you exit it when you want to?"

Ridenour compared Tekni-Plex to Ferro Corp., the publicly held specialty chemicals and plastics firm where he worked for a decade. Mayfield Heights, Ohio-based Ferro has struggled financially in recent years, but management rejected a buyout offer from competitor A. Schulman Inc. earlier this year.

According to Ridenour, the absence of offers from other firms after Schulman's initial bid for Ferro showed they weren't interested in Ferro's diverse product mix, which includes chemicals used in ceramic production, as well as plastic compounds, concentrates and additives.

"You could see the same thing happen with Tekni-Plex that happened to Ferro," he said.


Comments

Klöckner Pentaplast, Tekni-Plex would appeal to private equity

By Frank Esposito
Senior Staff Reporter

Published: September 17, 2013 10:59 am ET
Updated: September 20, 2013 11:33 am ET

Post Your Comments


Back to story

Market Reports

Thermoformed Packaging 2014 Market Review & Outlook – North America

This in-depth report provides analysis and discussions of economic and political conditions, market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as strategies being implemented by thermoformed packaging companies. In addition, there are reviews of 25 leading thermoformers in the packaging segment, assessing their growth initiatives and performance metrics over 10 years.

Learn more

Automotive Market Review and Outlook 2014 – The Americas

This 75-page report features in-depth analysis of the automotive industry for the Americas. It includes discussions of market trends, legislative/regulatory activity impacting production and threats as well as design strategies being implemented by the major automakers. Detailed charts and data tables outline North American automotive production over the last five years.

Learn more

Plastics Building & Construction Market Review and Outlook 2014 with MS Excel chart data

This report provides in-depth analysis of the plastic building and construction market for North America, including discussions of trends, opportunities, threats and the latest developments in construction trends that impact plastics processors.

Learn more

Upcoming Plastics News Events

May 6, 2014 - May 8, 2014Plastics in Medical Devices 2014

May 12, 2014 - May 12, 2014Plastics News Brazil Pharma Summit

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

February 3, 2015 - February 7, 2015Plastics News Executive Forum 2015

More Events