The six film-packaging companies that came together three years ago as Plassein International Corp. are about to split apart again like chemicals after a brief reaction.
The leveraged buyout of the half-dozen film makers coalesced spectacularly in an era of roll-ups and mergers. Now, triggered by Plassein's Chapter 11 bankruptcy filing May 14, the companies are about to be sold to several bidders and the company dissolved, according to a series of court filings.
The quick demise of Plassein, in a much-changed world since early 2000, has become more routine than spectacular, said Thomas Blaige, managing director of Chicago-based equity firm Lincoln Partners LLC. Several other roll-up companies, including bag maker Apple Plastics International LLC, recently went through a similar process.
``You really need to have the right leadership in place or it's very difficult,'' Blaige said. ``Otherwise, you're just putting businesses together but not creating value.''
The pieces of Plassein, based in Willington, Conn, were being parceled to several buyers last week. Exopack LLC, a paper and film packager that was the product itself of a management buyout, has agreed to purchase four of Plassein's six facilities, said Exopack President and Chief Executive Officer Patrick Woods.
Among those companies being purchased by Exopack is the former Rex International Inc., a well-respected maker of shipping sacks that will add more heft to Exopack's existing products. According to several sources, Thomasville, N.C.-based Rex was the only portion of Plassein that was profitable after their 2000 deals.
``We went after the facilities that we thought were very applicable to the kinds of markets that we're a strong part of,'' Woods said. ``They had six plants, and not all of them had a lot of value to us or operated as efficiently. We pulled out the ones that had the most to offer us.''
Plassein also intends to sell the assets of its Salem, N.H., facility to EuroPackaging plc of Birmingham, England, for $5.5 million, according to several filings at U.S Bankruptcy Court in Wilmington, Del. The purchase will give EuroPackaging, a large maker of shopping bags in England and Malaysia, its first toehold in North America, said Lorne Fienberg, a Boston-based attorney representing EuroPackaging in the sale.
``This is a highly successful company in Europe and elsewhere that is looking to enter the market in the U.S.,'' he said. ``This was their vehicle to make an entry: a well-established business with a stable work force and some customer contracts.''
The remaining Plassein plant in Martin, Mich., still is on the market, according to court filings. Two other plants in Virginia and South Carolina closed last year as part of a push by Plassein to cut costs.
Plassein President and CEO V.M. Philbrook said May 23 that the company was happy with the progress of the sale process. Several bidders had expressed interest in the business, he added. Philbrook declined to discuss details of Plassein's decline, saying that the circumstances were a matter of public record.
Executives at Trivest Inc., the Miami-based investment fund that owned most of Plassein, were unavailable for comment last week. But court documents told the story of a company that had fallen on hard times after some early attention. A Mount Olympus of debt and difficulties integrating six disparate companies seemed to bury Plassein.
The extruder was created in January 2000 from five smaller-sized film producers: Transamerican Plastics LLC, Marshall Plastic Film Inc., Nor Banker Inc., Key Packaging Industries Inc. and Plastical Industries Inc. All had sales of $20 million or less. Several of the companies were in turnaround, having faced their own financial troubles.
But with the purchase in August 2000 of Rex, a $65 million maker of heavy-duty shipping sacks and specialty and stretch film, sales swelled. Eventually, by last year, sales had come close to $150 million.
Originally, the plan from the original, Houston-based management team was to take the company through an initial public offering, according to several sources close to the company. But Trivest, a private holding company with several other plastics-related concerns, stepped in.
Frank McNabb, a film industry veteran who had close to 20 years of experience at Union Carbide Corp, was plucked to run the operation.
But profitability never came. When it filed for Chapter 11, Plassein had debt of close to $135 million, with sales of only $146 million in 2002. More than 1,000 creditors were listed as being owed money.
McNabb retired and became vice chairman, replaced in October by Philbrook, a longtime executive with the consumer packaging division of HuhtamÃ¤ki Oyj.
Chicago-based investment firm Mesirow Financial Inc. was hired in March to find buyers for the plants. The firm put the facilities up for auction a month later, a court filing said.
Among the bidders, according to court filings, were Appleton Papers Inc., which ended up in May acquiring another film packager; Wind Point Partners, the owner of thermoformer Alloyd Co.; and protective packaging company Polyair Interpack Inc.
Meanwhile, Plassein is seeking a $12 million bank financing agreement to continue operating until its facilities are sold or closed. The next court date is June 5, where the sales process will be reviewed.
The Exopack purchase includes plants in Thomasville; Longview, Texas; Ontario, Calif.; and Newmarket, Ontario. Together, those facilities have close to 600 employees, Woods said. The company greeted the sale, for undisclosed terms, as a major step to grow its flexible packaging business.
The plants add complementary products and geographic reach to Exopack, Woods said. While the Rex facilities complement its shipping-sack line, the company also gains agricultural film, he said. All have high-end extrusion and converting equipment, he said.
Spartanburg, S.C.-based Exopack was formed in August 2001 after a buyout by managers of International Paper Co.'s flexible packaging division. Initially, it focused more on paper packaging than on plastics, with about 80 percent of sales coming from the former material, according to Woods.
The Plassein facilities change that mix to about two-thirds paper to one-third plastics, Woods said. The company currently has 10 facilities and sales of about $400 million. Exopack's goal is to achieve $1 billion in annual sales, Woods said.
A lot of that growth will come from plastics, where a conversion continues from other materials, he said. The Plassein plants represent Exopack's largest acquisition to date.
The Plassein facilities make monolayer and coextruded film, primarily from polyethylene but using several other materials.
``The market is moving strongly to the plastics side, and there are [buying] opportunities there,'' Woods said. ``We're taking this one step at a time, but this is a nice step to take. We're very excited to be in this position.''
The sale is not expected to be completed until the end of summer, Woods said. Plassein attorneys, who did not return telephone calls last week, were sorting out creditor issues before the sale was final, he said.
Plassein also has a stalking-horse suitor for its Salem, N.H., plant in EuroPackaging. If the sale is approved June 5, Birmingham, England-based EuroPackaging will gain its first facility in North America, Fienberg said. The 15-year-old company recorded sales of US$251 million last year, according to its Web site.
The company plans to retain the plant's 130 employees, Fienberg said. If no other bidders come forward by a May 30 deadline, EuroPackaging could complete the acquisition as soon as mid-June, Fienberg said.
Plassein considered liquidating the Salem facility before selling it at auction, a filing said. The facility has been plagued by an inability to pass resin costs to customers, including Wal-Mart Stores Inc., and by a ``potentially costly'' patent infringement lawsuit brought by Sonoco Products Inc., the filing said.
EuroPackaging plans to introduce a new manufacturing process to the New Hampshire facility, possibly blunting the Sonoco case, the filing said. Fienberg had no details of that process but said there were several solutions available to address that still-outstanding case.
While the company might be close to extinct, Plassein has a few contentious issues. Paul Gage, former president and CEO of Rex, filed a civil suit against Plassein in October 2002 alleging that the company reneged on terms of an employment contract and owed him money from stock options and severance benefits.
``They committed to paying me,'' Gage said in early May. ``They then informed me that their financial condition did not allow them to do that. They just indicated there was nothing they could do.''
Gage said he was notified in late March that Plassein could not pay him the severance package. The case has been in arbitration. Meanwhile, Gage said that he was counting on money that suddenly evaporated.
The company is about to go the same direction.