When Chairman Richard Landis of family-owned Landis Plastics Inc. decided to retire this summer, the burden was left to his son, Greg, and other top executives to decide the company's future.
They formed a plan. They decided first to test the interest level in selling Landis. If they found little enthusiasm, they would keep the company. The family hired Milwaukee-based investment firm Robert W. Baird & Co. Inc. as an adviser.
It did not take long for the direction to become clear. The number of inquiries was so high that a sale became inevitable, said Greg Landis, president of the Chicago Ridge, Ill., injection molder and thermoformer.
After several heated bidding rounds, Landis signed a definitive agreement with Berry Plastics Corp. late Oct. 15. Berry will pay $228 million in a deal expected to close by year's end.
``It was a marriage we just put together late [on Oct. 15],'' Landis said a day later. ``It started from a well-accepted offering, and it evolved into what it did. Sometimes when you enter these transactions, they take on their own life.''
The sale fits Greg Landis' vision of continuity for the business, founded by his father and grandfather in 1954. Landis and virtually his entire management team will stay with Berry to run the newly named Dairy Division. The division will include the five Landis plants and several Berry facilities that make dairy containers.
Greg Landis also will hold a significant equity interest in Berry, though the percentage was not divulged. And even company co-founder Richard Landis has a role, albeit as a consultant to the much-expanded Berry.
``We're thrilled to have them,'' said President and Chief Executive Officer Ira Boots of Evansville, Ind.-based Berry. ``Any time you're presented with an opportunity to buy a world-class company such as Landis, with the deep background they have in plastics packaging and the service of customers, you can't help but be a happy man,'' Boots said.
Berry, already a major North American name in injection molded containers and lids, will bulk up its branded product line with the buy. While Berry focuses a good deal of its attention on the institutional food market, Landis is a key player in the major-label and private brands seen on many supermarket shelves.
According to a prospectus issued by Landis to potential buyers, the company commands a whopping 51 percent share of all yogurt containers sold in North America and 52 percent of the cultured dairy market, including packages for sour cream and cottage cheese. The company also claims to hold the top position in North America for margarine tubs.
And Landis has solid relationships with influential customers such as Kraft Foods Inc., General Mills Inc. and Dean Foods Co. More than half of Landis' sales comes from that grocery-store triad, according to the prospectus.
``[Landis is] into containers for Cool Whip, Crystal Light, Yoplait and General Mills' frosting containers,'' Boots said. ``In most cases, they supply a very large percentage of those types of packages. Between the two of us, we can reach very large companies with highly visible, branded products and niche products.''
Landis' storied track record includes the following, according to the prospectus: The company was one of the first to develop stack molds in 1966. It developed one of the first 32-cavity molds in 1980. And it was among the first to perform domestic printing of a nonround container in 1999.
The sale propels Berry even faster on its course to reach $1 billion in sales, a goal set last year when an investment team that included equity groups of Goldman Sachs & Co. and JP Morgan Chase & Co. purchased the company for $837.5 million.
Using 2002 sales as a guide, Berry and Landis together recorded more than $700 million last year - Berry with $494 million in sales, and Landis at $211.6 million. The deal continues to advance Berry as a dominant figure in molded and thermoformed containers. The purchase is Berry's 17th acquisition in 11 years, and the largest yet, Boots said.
``Interest level was high,'' said packaging industry analyst Timothy Burns, president of Solon, Ohio-based Cranial Capital LLC. ``But Berry was difficult to top. They are buying everything in sight right now.''
According to several other sources, a host of competitors and equity groups vied to buy Landis.
Berry paid a multiple of 6-61/2 times earnings before interest, taxes, depreciation and amortization, a nice but not excessive price, according to several equity analysts. Among others said to be interested were container maker Winpak Ltd. and packaging giant Alcoa Inc.
The agreement will create a container-making force that includes 17 facilities and a workforce of about 4,800. Landis brings to Berry a little more than 100 injection molding machines, 78 printers and five thermoforming machines, Greg Landis said. The company also makes its own molds.
Landis had been expanding before the acquisition. From 1987 to 2002, Landis recorded a compounded annual growth rate of 10.4 percent. The company recently decided to expand its Tolleson, Ariz., plant to close to double its size, adding 120,000 square feet. That plant had opened in 2000.
Landis had faced some hurdles in the late 1990s, including a well-publicized sexual-discrimination settlement and a large Occupational Safety and Health Administration fine for safety issues. But the company has overcome those challenges, and they did not affect the sale, according to sources familiar with the negotiations.
Instead, the family owned company decided it was time to grow by joining with a larger player, Greg Landis said. Under the wing of Richard Landis and his father, Henry J. Landis, the company had never made an acquisition. Instead, all growth was internal, Greg Landis said.
``When this started to unfold, we determined through the process of elimination that this certainly was the right fit for customers and employees,'' Greg Landis said.
One hidden aspect of the sale is the growth of thermoformed containers. Berry has carved a successful niche producing cups in high quantities, Boots said. And about 10 percent of Landis' sales now come from thermoforming, Greg Landis said.
Merging the companies' technologies could produce a stronger player in a swelling field, Landis said. Food customers are paying attention to thermoforming, said Thomas Blaige, chief executive officer of Chicago-based investment banking firm Thomas Blaige & Co. LLC.
``It's a big growth area,'' Blaige said. ``Landis has gone from zero thermoforming five years ago to a stronger position today.''
On one hand, the sale was about critical mass. The purchase could inch Berry to a position as the fifth-largest injection molder in North America, according to Plastics News' figures.
But it is also about generational change at Landis. It was a difficult decision to sell the family business, said Greg Landis, who will gain a seat on Berry's board of directors.
``But it's not an uncommon transition for a family business run for about 50 years and in its fourth generation to move to the next level,'' he said. ``We're staying involved. It's a very seamless transition, and that's the way we wanted it.''