DUSSELDORF, GERMANY — Consolidation is coming to the plastics packaging industry, and Graham Packaging Co. intends to be one of the consolidators, according to Chairman Donald C. Graham.
``The moves we've made are the moves that guarantee that Graham will be one of the players as the industry consolidates,'' he said at Nova-Pack Europe '98, held Oct. 20-12 in Dusseldorf.
``When the list of bottle suppliers gets small, Graham is going to be one of them.''
Graham Packaging, of York, Pa., underwent a leveraged buyout earlier this year, bringing in growth capital from Blackstone Group, a New York investment firm.
Graham said the move helped him accomplish several goals, including a few personal ones: to cash in part of his stake in the firm, and to turn over responsibility to his management team. The deal also let the firm keep its identity, reward its managers financially and bring in growth capital.
``It provided a capital structure that allows the company to be even more aggressive than it has been,'' Graham said.
Since the deal, Graham has acquired five European container blow molding plants from CarnaudMetalbox, and is buying two as-yet-unidentified firms in Latin America, he said.
He said the deal sets the stage for an eventual initial public offering of the blow molding firm, which is ready for an IPO now, but has no timetable yet to sell stock.
``There's no rush, no need. We're adequately funded to do what we want to do now,'' he said.
Graham said that selling the firm to another packaging firm also had been an option in the past. But his remarks indicated he did not want to go that route.
A sale would have been a huge step for Graham, considering the unique nature of its business. Graham actually has machines and employees inside many of its customers' plants. Selling the firm would not just mean a change in suppliers for those customers — it would mean a change in partners.
Graham said his firm has benefited from a number of trends in the packaging industry, including supplier consolidation and the rise of heat-set PET bottles.
Today, even some of the largest packaging firms have highly leveraged capital structures — implying that they are ripe for a takeover or spinoff of some units.
Graham has estimated blow molding sales of $515 million.
Schotland Business Research Inc. sponsored Nova-Pack Europe.