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Private equity firm buys diversified plastics company Tekni-Plex

By: Frank Esposito

November 18, 2013

Private equity firm American Securities has purchased specialty plastic films maker Tekni-Plex Inc. for an undisclosed price.

New York-based American Securities “found Tekni-Plex very attractive given our strategy of investing in market-leading companies,” managing director David Horing said in a Nov. 18 news release. “We believe the company is poised for a strong future.”

Tekni-Plex operates 25 plants in nine countries worldwide. The King of Prussia, Pa.-based firm consists of eight companies, including blister pack film maker Tekni-Films and perishable food packaging producer Dolco Packaging of Decatur, Ind. Other business units operated by Tekni-Plex — which was founded in 1967 — include Colorite Compounds and Action Technology, a leading plastic tubing maker.

In the year ended June 30, 2012, Tekni-Plex had sales of almost $655 million. More recent sales numbers were unavailable, but industry sources said that the recent sale of Tekni-Plex’s Swan Hose business lowered the firm’s annual sales to about $575 million.

American Securities is buying Tekni-Plex from Los Angeles-based Oaktree Capital Group LLC and Avenue Capital Group of New York. Those two private equity firms had been majority owners of Tekni-Plex since 2008.

Market sources told Plastics News that American Securities was paying about $800 million for Tekni-Plex. That amount would be about eight times annual EBITDA for Tekni-Plex, sources said.

In the release, Tekni-Plex CEO Paul Young said that working with American Securities “will enhance our ability to service our customers worldwide through ongoing investment in product development, technology and expansion of our global footprint.”

American Securities already owns a major plastics asset in the form of Advanced Drainage Systems Inc., the Hilliard, Ohio-based firm that ranks as North America’s largest maker of high density polyethylene pipe. ADS — with annual pipe-related sales of just over $1 billion — checked in at No. 2 in a recent Plastics News ranking of the region’s largest pipe, profile and tubing makers.

Industry consultant Peter Schmitt said in an email that Tekni-Plex “offers a new buyer strong share position — number one or number two — and margins in its business segments, especially in its healthcare and specialty segments.”

“A buyer will find the potential to scale the restructured Tekni-Plex attractive,” said Schmitt, who’s managing director with Montesino Associates LLC in Wilmington, Del. “Scaling strategies include acquisitions, divestment of a segment to fund the growth of a preferred portion of the business, or accelerating the adoption of new technologies in segments where Tekni-Plex already enjoys margins and share.”

He added that five years of ownership “is about typical for an Oaktree holding.”

The next step in Tekni-Plex's path, according to Schmitt, is “scaling the now streamlined company, aiming at faster and larger growth, gaining strategic market shares, and launching targeted new products.”

In September, plastics M&A pros Bill Ridenour and John Hart each predicted that Tekni-Plex — as well as plastic film leader Klockner Pentaplast Group, which remains on the market — would be sold to another private equity firm.

Ridenour — owner of Polymer Transaction Advisors Inc. in Newbury, Ohio — said at the time that selling Tekni-Plex “might be a challenge because of its diverse product mix.”

Hart — plastics and packaging group director for P&M Corporate Finance LLC in Southfield, Mich. — added that neither Tekni-Plex nor Klockner “has a real obvious strategic buyer.”

In April, Tekni-Plex sold Swan Hose to Jacobson Partners, a New York-based private equity firm, for an undisclosed amount. Tekni-Plex officials said at the time that they made the sale "to allow us to focus on our core health care, food packaging and specialty segments." They also said that the company would use the sale proceeds to reduce debt. Tekni-Plex bought the Swan business in 2001 from Mark IV Industries Inc.

The sale of Swan came a few month after Tekni-Plex spent $9 million in late 2012 to upgrade a plant making multilayer flexible packaging structures in Flemington, N.J.