SALT LAKE CITY — Less than a decade ago, Huntsman Packaging Corp. was a largely unknown company. Now it has become one of the fastest-growing film manufacturers in North America, acquiring 10 film companies since 1992.
``We saw the opportunity to be part of [industry] consolidation and create a very successful, dominant company in the industry with value-added film products,'' Richard Durham, chief executive officer of Huntsman Packaging, said in a Sept. 24 interview at Huntsman headquarters in Salt Lake City.
Each purchase has bolstered the firm's portfolio by incorporating capacity and technology into an existing business group, or by adding a new end market. In fact, in just four years Huntsman Packaging's sales in North America have risen from $468 million to about $750 million.
``[Acquisition] is something that is part of the culture at Huntsman,'' Durham said. ``We identify opportunities for growth through acquisition, then build strategically on our base to strengthen operations.''
Most recently, Huntsman's interest has turned to biaxially oriented polypropylene film.
``We have become the dominant supplier of value-added products,'' Durham said. ``We look at how to deliver more value to our customers as a supplier. A high percentage of our customers also buy OPP films.''
As if to punctuate that point, Huntsman Packaging has offered to buy Applied Extrusion Technologies Inc., the world's second-largest producer of OPP film — not once, but twice. AET's board of directors has rebuffed both proposals, the latest valued at $138 million.
``We will evaluate our options,'' Durham said. ``I believe it is a very good company with good market position. It is very surprising to me, given the very full and fair offer, that [AET] expressed no interest.
``We want to be the best supplier of film,'' he said. ``The largest segment [of our business] is selling to the converter market. Stretch, PVC, converter, custom, personal-care, barrier film, you have to have the best. OPP is a natural platform for growth in value-added film products.''
Although AET's reaction disappointed Durham, he said Huntsman has not closed out any options — nor is it pursuing any options, for the moment.
While Huntsman has played the pursuer on this and some other deals, it doesn't always work that way, Durham said. ``I must get 10 calls a week about film companies that are for sale.''
But acquisition candidates must meet certain criteria associated with Huntsman values, and their products must deliver superior value to the customer, he said.
``We are very selective,'' Durham said. ``We look at our existing customers and ask how this acquisition affects them.''
Sometimes, when secrecy agreements allow, Huntsman asks customers about the potential deal.
``We go to the customer to see if an acquisition would be a good fit, to find what provides the best value for them. And if we find a company that knows how to add value, transitions go smoother.''
The firm's first acquisition was Goodyear Film Products in June 1992. The unit made stretch, PVC and medical films.
``This was an opportunity financially and strategically to invest in an industry that we knew fairly well,'' Durham explained.
Next, Huntsman bought Mobil Design Products in January 1993. The company served the printed products market. Princeton Converted Products, a maker of printed products and barrier films, came on board in July 1993.
Huntsman places emphasis on whether a purchase can accommodate further growth. If an acquired firm focuses on two end markets, one of which Huntsman already serves, Huntsman strives to augment the second market, most often through another acquisition.
As a result, Huntsman's next three acquisitions focused on building the new barrier-films business — Princeton Specialty Films, picked up in October 1993; Performance Films, in June 1995; and United Films, in June 1996.
In October 1996, Huntsman added converter films and boosted its stretch-film capacity with the purchase of Deerfield Plastics. The new converter business got a big push in September 1997, with the addition of CT Film. That deal also vaulted Huntsman Packaging into personal-care products, such as diaper back-sheet.
This year, the firm has acquired Ellehammer Industries Inc., a maker of printed film products in Seattle and Blessings Corp., a Newport News, Va.-based producer of printed products and extruded films — again, including diaper back-sheet.
``Blessings has developed a leading position in personal-care films,'' he said. ``Being a leader in technology is important to us. That was a great acquisition.''
But Huntsman has not grown through acquisition alone. It installs state-of-the-art equipment and removes older equipment from plants as soon as they are acquired.
``We have added five- and seven-layer lines,'' Durham said. ``The amount of capital we've invested far outweighs anyone else in the industry. We have done a lot of restructuring and doubled our capacity.''
The firm operates about 225 extrusion lines and employs about 2,000. It commands a market share of 50 percent for the personal-care film market and serves Kimberly-Clark and Johnson & Johnson.
No matter what market Huntsman serves, its goal is to be No. 1 or No. 2 in that industry. If the firm is too small, Durham believes it can't serve customers as well. In addition, he contends that there are few firms with the technical expertise, equipment or capabilities to make what Huntsman makes.
``I believe we supply superior film vs. our competitors,'' he said. ``And we don't view ourselves as a commodity-film company.''
As well, Durham was quick to point out that Huntsman Packaging has no interest in becoming a converter by acquiring one.
``We want to be the best supplier of film,'' he said. ``Our largest segment is selling to the converter market. There is more value for us to supply those markets.''
Other growth opportunities include Latin America. With the Blessings acquisition came Mexican company Nacional Envases de Pl stico SA de CV, or Nepsa. This is a key region for potential growth, Durham said. With Nepsa in place, that step is a logical progression.
Huntsman Packaging got its start as a subsidiary of Huntsman Corp., the Salt Lake City chemical firm founded by Jon Huntsman Sr. But on Sept. 30, 1997, Huntsman Packaging became a stand-alone entity in a tax-free split.
Durham and his wife, Christena — the oldest daughter of Jon Huntsman Sr. — traded their shares of Huntsman Corp. for control of 35 percent of Huntsman Packaging. Jon Huntsman Sr., chairman and chief executive officer of Huntsman Corp., controls the remaining 65 percent.
Durham had been co-president and chief financial officer of Huntsman Corp., and Huntsman Packaging still is based within Huntsman Corp.'s contemporary headquarters building.
Although no Huntsman unit is traded publicly, the thought of taking Huntsman Packaging public has crossed Durham's mind.
``I'm not opposed to becoming public,'' he said. ``That was part of the thought in splitting off.
``Being a public or private company, we would have to evaluate what we think that we can do with the future of the company. Right now, being private makes more sense.''
The firm has sold bonds to finance its growth. But if the equity market becomes a more attractive option, Huntsman Packaging could find itself on a stock exchange, he said.
``We have established a good relationship with our lenders over time,'' Durham said. ``They've seen what the resin side is able to do, and we have credibility.''
When Huntsman does make an acquisition, it explains its plans to lenders before following through.
A group of four makes the decisions for Huntsman Packaging — the Durhams, Huntsman and Jack Knott, executive vice president and chief operating officer of Huntsman Packaging.
``We are a flat, lean organization for day-to-day operations,'' Durham said. ``There are no unnecessary layers.''
He said the firm encourages its business groups to act entrepreneurially, and acquisitions are integrated quickly. That allows Huntsman to balance the buying power and technical experience of a large film-products firm with small business units that are responsive to customers' needs.
Durham claims Huntsman is one of the largest U.S. buyers of resin annually, purchasing 750 million pounds of polyethylene, 100 million pounds of PVC and 50 million pounds of PP.