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October 24, 2003 02:00 AM

Landis sale shows investor confidence

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    (Oct. 27, 2003) — Here's a message to the skeptics who question the future of the North American plastics processing industry: Maybe there's a bit of life left in the horse after all.

    Maybe quite a bit.

    The latest headline: Berry Plastics Corp. will pay $228 million for thin-wall packaging rival Landis Plastics Inc.

    Berry already is among the 10 largest North American injection molders, according to Plastics News data, and a significant thermoformer, too. The deal will push the firm to about $700 million in annual sales. At that level, Berry is in the rarified air of the largest global automotive molders. How big a deal is this? Consider last year's purchase of Courtesy Corp. by Precise Technology Inc. for $130 million, which created a processor/toolmaker with $290 million in total annual sales. A major acquisition, sure, but not in the same league as the Berry-Landis combination.

    Landis, a 50-year-old company, always has been family-owned. Berry, which is owned by Goldman Sachs Capital Partners, JP Morgan Partners and members of Berry's management, has been on an acquisition binge — this will be its 17th purchase in 11 years. Berry's team has put together a company with formidable experience in injection molding and thermoforming, as well as specialized printing and decorating. In addition to packaging, the company is a big player in drink cups, closures and aerosol overcaps.

    Deal-makers and investors have talked for years about the need for consolidation in the injection molding sector. Their theory is that processors need to be larger to deal with their mega-sized resin suppliers and supersized customers. Economies of scale at bigger companies are significant, especially in the areas of raw material purchasing and financing. Also, processing technology has progressed to the point where company owners no longer need to be manufacturing experts with grease under their fingernails.

    The purchase will be a great test for that theory.

    The sale of Landis may prompt the question: Is there room left for family-owned molders? Well, you don't even need to look beyond the packaging sector to see examples of successful family-owned firms, with companies like Letica Corp. and Plastek Group. So don't consider this a eulogy for the old-fashioned processor entrepreneur. There are hundreds of them still around, and many are awfully successful.

    Rather, see this as another vote of confidence by financial investors in the North American processing industry. They must see plenty of room for profit, and for growth, and that's good news for everyone.

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