FlexSol Packaging Corp. has made its first acquisition, buying multilayer film producer Eclipse Packaging Inc.
The deal is part of FlexSol's strategy to make a larger entree into high-performance films.
FlexSol formed in 1999 by joining film maker Delta Plastics Corp. with film and bag producer Essex Plastics Inc. Since then, FlexSol has built its base by adding equipment and plants, Chief Executive Officer Brian Stevenson said in a May 14 telephone interview.
Now the company wants to grow quickly by seeking engineered film companies, Stevenson said. Several other possible deals are being considered, he said. Terms of the Eclipse sale, completed May 13, were not disclosed.
``We've probably looked at 10 companies in 18 months,'' said Stevenson, based at FlexSol's Pompano Beach, Fla., headquarters. ``We've rejected those that are not a strategic fit. Engineered film is where our growth is coming from, and we plan to fill a need by becoming a larger competitor in that market.''
Eclipse fits FlexSol's plans, Stevenson said. The Statesville, N.C., company is a regional producer of high-barrier food, beverage and industrial film and performs its own converting. The company also specializes in niche film products such as the backing for masking tape and courier envelopes.
Eclipse employs 48 at its 45,000-square-foot plant. The facility can produce 25 million pounds of polyethylene film annually; currently it makes about 8 million to 9 million pounds, Stevenson said.
FlexSol will fill that extra capacity quickly, Stevenson said. Its plans this year include installing a fourth coextrusion line in the Statesville facility, he said.
The company also is adding two new coextrusion lines to its Nashville, Tenn., plant, where much of its work in barrier film takes place. A five-layer coextrusion line will be installed by the end of July, and another multilayer line currently is being installed, Stevenson said. The company has added three new lines in Nashville during the past 12 months.
FlexSol now has annual capacity of more than 70 million pounds for coextruded film, a figure the company wants to grow at a rapid rate, Stevenson said. Overall, the company can produce 280 million pounds of film annually, including that from the former Eclipse operation.
Robert Whitener, a former executive with several film manufacturers, founded Eclipse in 1998. Whitener, who was unavailable for comment May 14, will stay with FlexSol to run the Statesville operation, Stevenson said.
FlexSol's target market of higher-value films is one that has attracted a small cluster of publicly traded competitors such as Bemis Co Inc., Sealed Air Corp., Pactiv Corp. and Pliant Corp.
The specialty film market has weathered the economic downturn well, especially with the advent of new food products that require custom packaging, he said. Stevenson is a former executive with Schaumburg, Ill.-based Pliant, then called Huntsman Packaging Corp.
``Much of my management team was with me in my earlier Huntsman days,'' Stevenson said. ``We have the same type of strategy on the higher-end side. We've developed a great base for that business.''
The move to value-added film is a smart play for FlexSol, said David Solomon, managing director and co-head of the plastics group for equity firm Goldsmith Agio Helms & Lynner LLC. In the flexible packaging sector, the number of pounds of film sold has grown by about 4.6 percent annually during the past decade, faster than the gross domestic product, Solomon said.
Firms that have taken the lion's share of profit in the flexible packaging sector are those in higher-value film products, he said.
``Commodity film companies face a big dilemma in making a buck,'' said Solomon, who is based in New York. ``If a company offers something proprietary, it can avoid being in a downward price squeeze.''
FlexSol has been mounting an internal expansion drive since 2000, adding 12 new lines in less than three years. The company's majority shareholder is Banc of America Capital Investors of Charlotte, N.C. Film producer Sigma Plastics Group of Lyndhurst, N.J., also has an ownership stake but does not run operations.
FlexSol had focused on lowering debt and building its systems before it began searching for acquisitions. That strong base could help it succeed, said Solomon, whose company helped put together the initial leveraged buyout.
FlexSol was No. 33 in Plastics News' ranking of North American film and sheet makers in 2002, with $189 million in relevant sales for the previous year and total sales of$205 million. The company, which would not disclose its total 2002 sales, has six facilities including the Eclipse operation.