An equity fund run by Goldman Sachs & Co. has agreed to purchase Berry Plastics Corp. after making an auction bid trumping that of several other firms.
GS Capital Partners 2000 LP, a fund managed by New York-based investment firm Goldman Sachs, plans to buy Berry for $837.5 million, which includes repayment of debt. The deal is to be completed in the third quarter.
Several firms vied to buy Evansville, Ind.-based Berry, including leveraged-buyout companies Thomas H. Lee Co. and Bain Capital LLC, according to several sources familiar with the sale. Berry fetched more than seven times earnings before interest, taxes, depreciation and amortization.
The deal underscores a rise in equity firms' attention to plastics processors, especially those in packaging, said Charles Johnson, managing director of Richmond, Va.-based Matrix Capital Markets Group, a firm specializing in midsize acquisitions.
``There's about $100 billion of uninvested capital from private equity groups, coming on the heels of record fund raising in 1999 and 2000,'' Johnson said. ``The plastics and packaging sector is a hot spot for some of those groups. Berry got a fairly attractive price.''
Berry, an injection molder and thermoformer of packaging and housewares products, began exploring financial alternatives in late March to help with growth, said Ira Boots, president and chief executive officer.
The company currently is owned by affiliates of equity firm First Atlantic Capital, J.P. Morgan Chase & Co., Aetna Inc. and Berry executives. GS Capital will purchase all the shares.
Berry is privately held but has debt that trades on the public market.
The company has recorded heady growth in annual sales from $57 million in 1990, when First Atlantic first acquired Berry, to $462 million last year.
But that growth came at a price, as leverage also rose. The sale gets Berry out from under its debt-related interest expense, much of it coming from 10 acquisitions made since First Atlantic's ownership.
The company lost nearly $2.1 million in 2001, largely attributable to interest expense, but has seen losses shrink during the past several years.
``We believe that Goldman Sachs brings to Berry an excitement in allowing us to pursue programs, projects and acquisitions that we were not able to, due to limited resources in the past,'' Boots said in a May 28 telephone interview. ``We now have deeper pockets but the same skill sets. This is the premier partner Berry could have to assist us in projects.''
Boots met last week with GS Capital officials to discuss such opportunities. GS Capital formed in July 2000 and has total committed capital of $5.25 billion, a much-larger financing pool than that from First Atlantic.
Berry's core product lines include drinking cups, aerosol caps, closures, open-top containers and housewares. The company, with about 3,200 employees, ranked 10th on Plastics News' recent sales-based list of North American injection molders.
GS Capital does not plan any radical changes in Berry's operations or at its 13 plants, said Joseph Gleberman, managing director of Goldman Sachs. The company plans to seek acquisitions that can be added to Berry and fit its product mix, he said.
``It's not a fixer-upper, and they're in good shape,'' Gleberman said. ``We see it as a steady business that can gain share from other materials.''
Goldman Sachs traditionally looks for a return on its invested businesses in five to 10 years, he said.
Gleberman acknowledged that there is plenty of money in private equity firms and good companies available for sale this year. Boots added that a need exists for consolidation in the plastics packaging marketplace.
The level of competition and market conditions dictated the healthy price commanded for Berry, Gleberman said.
``We competed in an auction for a good company,'' he said. ``It's not an environment where you steal anything.''