Five independent film processors have combined to form Plassein Packaging Corp., a Hartford, Conn.-based entity with six plants in the United States and Canada and annual sales of more than $100 million. Plassein's five members are Transamerican Plastics LLC of Ontario, Calif.; Marshall Plastic Film Inc. of Martin, Mich.; Nor Baker Inc. of New Market, Ontario; Key Packaging Industries Inc. of Salem, N.H.; and Plastical Industries Inc. of Spartanburg, S.C.
The firms cover several major film markets, including industrial packaging, food and consumer products, automotive, retail, medical, pharmaceutical and construction.
Plassein management expects the firm to be "a very major player in the film industry," according to Sam Chebeir, who founded and owned Transamerican and Plastical and now is Plassein's research and development director.
"Our industry is ripe for consolidation," Chebeir added. "It makes perfect sense to be a national company instead of a regional company. You can compete for national accounts and you have an advantage if raw material costs become an issue."
Trivest Inc. of Miami will hold controlling interest in Plassein. Trivest's other plastics-related holdings include truck-bedliner maker Penda Corp. of Portage, Wis.; film extruder and injection molder Atlantis Plastics Inc. of Atlanta; plastisol producer Rutland Plastics of Pineville, N.C.; and plastics cutlery maker Jet Plastica Industries Inc. of Hatfield, Pa.
Managers at the five Plassein member firms also will own a share of the new company, as will GulfStar Group, a Houston-based investment firm. GulfStar brought the investment opportunity to Trivest in early fall after being approached by Houston businessmen Tim O'Neal and Eric Paulsen.
O'Neal and Paulsen had worked for Enron Corp.'s plastics risk management unit in Houston, but branched off on their own to find consolidation opportunities for plastics processors.
O'Neal and Paulsen met with nearly 100 film processors while assembling the Plassein lineup.
In mid-1998, Plassein recruited film industry veteran Frank McNabb to lead the venture. After almost 20 years at Union Carbide Corp., McNabb was one of four managers who bought out the firm's home and automotive division in 1986 to form First Brands Corp., the maker of Glad trash bags and other consumer items.
McNabb left First Brands in 1993 to form Ergomedics, a medical back-support manufacturer in Burlington, Vt. He was lured back to the film industry by the opportunity Plassein presented.
"I knew there were a lot of small companies out there from my days at First Brands, and I knew they were struggling because they couldn't provide better distribution to national customers," McNabb said. "I had dealt with a lot of the players, so this is sort of going home again."
Plassein has "a very ambitious three-year plan," according to McNabb. Plassein managers soon will meet with other takeover candidates, and will follow up on business opportunities in South America and the Caribbean.
Top officials at Plassein's six plants will remain, with McNabb overseeing a lean, eight-person staff in Hartford.
"We want to keep local management involved in decision making," McNabb said. "We'll just provide them with the ammunition they need to grow."
Other industry veterans joining Plassein are Richard Mosback, chief financial officer; Jim Lavelle, vice president of purchasing; and senior technical engineer Jim Kubik, all of whom worked with McNabb at First Brands.
Key Packaging President Tink Davies also will join the Plassein management team as senior vice president of marketing and sales. Davies worked with Mobil Chemical Co.'s Hefty bag division for 25 years before joining Key in 1997.
"We see a strong industry opportunity and we've been lucky enough to hook up with a strong management team," said William Kaczynski Jr., Trivest managing director. "We've been involved in different facets of the plastics industry, but specialty film is one of the more attractive areas of the industry as far as growth rates are concerned."
McNabb believes there are plenty of ways in which Plassein's individual segments can grow each other's businesses. For example, Transamerican and Marshall each have received tough-to-get approvals to produce bags for medical applications. Marshall and Nor Baker also do a lot of business in laminated food packaging, another highly regulated niche. Similarly, Plastical does most of its business in the automotive sector, producing laminated floor mats, seat covers and overlays.
This combined product mix could be spread across all Plassein plants to provide a more efficient and profitable supply network for the firm's customers, McNabb said.
Plassein also plans to upgrade and improve film processing equipment at each of its six plants. Nor Baker's two Toronto-area plants also will receive new printing equipment and bag machines later this year. And one of Plassein's first orders of business was completing the installation of a new high density polyethylene film line at Key.
The evolution of the Plassein deal proves the need for consolidation in the film industry, according to O'Neal. When he and Paulsen first formulated the idea, they envisioned an initial public offering involving several processors. When the winds changed on Wall Street in mid-1998, such small-cap IPOs fell out of favor, and O'Neal thought the whole deal might collapse.
But McNabb and Plassein's five members urged O'Neal and Paulsen to change strategies and seek private financing for the project.
"That was gut-check time," O'Neal said. "The Merrill Lynches of the world said they weren't interested, but the need to consolidate was so strong that these companies were willing to proceed anyway. The business model and reasons for consolidation were unchanged."
The Plassein deal fits a pattern of recent acquisition activity in the film market, according to packaging industry consultant Huston Keith.
"Essentially, we're seeing small film companies of between $10 million and $50 million in sales combining to develop some kind of critical mass," said Keith, principal of Keymark Associates in Marietta, Ga.
"The problem with being a $10 million [film] company is that if you don't have good technology — and most don't — the really big competitors aren't interested in acquiring you," Keith added. "It's almost the same amount of work for them to acquire a $10 million company as a $50 million or $100 million company."
Consolidation also provides more buying power as well as technological support.
"In purchasing, they'll now have the pennies that really count when they're talking to resin manufacturers," Keith said. "And when you're a small company, you can't afford the R&D to get into the new things you need to do. Being a $100 million company starts to get you there."
