Thermoformer Alloyd Co. Inc. is poised to expand at a quickened pace now that the company has been sold to a Swedish packaging giant.
After a long courtship that began this summer, Stockholm, Sweden-based Svenska Cellulosa Aktiebolaget agreed Nov. 4 to buy Alloyd for $97 million. Alloyd has carved a large niche in display-friendly, transparent enclosures for consumer products, commanding a 13 percent market share in retail blister packaging in the United States, according to SCA officials.
The major thermoforming deal is complete but must gain U.S. anti-trust approval, expected as soon as this week. The purchase of Alloyd's six North American plants is a stepping stone to build a larger business in thin-gauge thermoforming, both in North America and internationally, said Colin Williams, president of Philadelphia-based SCA North America.
For SCA, clear packaging production represents a new market for an already-diverse company.
``We're not in this business in Europe or Asia,'' Williams said. ``We want to use Alloyd to create a global platform in high-visibility packaging and use it as a footprint to grow both in the U.S. and worldwide.''
Currently, Alloyd's plants are spread across the United States, Puerto Rico and Mexico, where it opened its newest facility a year ago.
Those markets for the clear consumer packages are not as developed in other parts of the world, Williams said. ``But it's coming like a tidal wave,'' he said. ``We'd like to be there early, as well as grow the business here.''
Others should take SCA at its word. The company, a key global player in tissue paper, personal-hygiene products and corrugated packaging, bought another plastics-based company, Tuscarora Inc. of New Brighton, Pa., in early 2001 and immediately expanded its presence.
Tuscarora, a maker of protective packaging from foam and other materials, has made about 10 acquisitions in the two years since the SCA purchase, said SCA North America senior Vice President John O'Leary. ``Look at our record,'' he said. ``We'll be just as committed to growth in specialty packaging.''
Alloyd, based in DeKalb, Ill., had been shopped by its owner, Chicago-based investment firm Wind Point Partners, on and off for several years. While the company always has been profitable, its investors were looking to reap a return on the business, said Alloyd President and Chief Executive Officer Ron Leach. Wind Point had owned Alloyd since 1989, a much longer holding period than that for a typical investment firm.
Since early this year, Alloyd has been the object of an intense bidding war, triggered when Los Angeles-based investment bank Houlihan Lokey Howard & Zukin was brought aboard by Wind Point to seek buyers. Interest picked up during the summer when SCA and many others entered the picture, said Houlihan Managing Director Jeff McKenzie, who heads the company's plastics and packaging group.
``It was frenetic,'' McKenzie said Nov. 6. ``It was as wild as you're going to see it. In the last couple of weeks, several companies wouldn't take no for an answer and kept coming back to us.''
While several packaging companies bid for Alloyd, Houlihan also got nibbles from other industrial holding groups and some equity firms, he said. In all, qualified bidders for Alloyd numbered ``well into the double digits,'' McKenzie said.
SCA was a late entrant that saw how Alloyd's strategy fit with its own, quicksilver growth plans, McKenzie said. The high-visibility packaging market has exploded in the United States during the past decade, with big-box retailers such as Wal-Mart Stores Inc. leading the way with both blister and clamshell designs, he said.
While SCA is a major global force, only about 15 percent of its sales come from North America, McKenzie said. That was a position the company wanted to boost, he said. ``They clearly wanted to aggressively grow in the United States,'' McKenzie said.
Alloyd's management team hoped to interest a player that wanted to hold the company for a long time, Leach said. SCA, with the financial clout of a larger company, fits that bill, he said. The company also gave management a long-term incentive package to stay, McKenzie added.
``We are building a portfolio platform company,'' Leach said ``The cultures of SCA and Alloyd are aligned closely.''
Started in 1961, Alloyd has an established name in the marketplace for retail packaging, said Thomas Blaige, chief executive officer of Chicago-based investment bank Thomas Blaige & Co. LLC. Alloyd expects to record about $80 million in sales this year and is a leading maker of plastics packages for such products as pens, razors, batteries, aftermarket automotive parts, toys, medical devices and tools.
The company also makes its own blister packaging equipment and heat-seal tooling, adding to its value as a single-stop supplier, SCA's Williams said. Alloyd currently has 561 employees.
The thermoforming market has room for Alloyd to grow, Blaige said. Of about 350 thermoformers in North America, 88 percent of them have sales of under $30 million, he said.
``It's a very fragmented area,'' he said. ``There are some 300-plus companies that potentially could be acquired.''
Leach, who was promoted in late July to president and CEO of Alloyd, said his company had shifted its position on global growth. ``Our perspective has changed, becoming more global in time to match the expanding operations of our leading consumer-brand customers,'' he said.
SCA officials said Tuscarora and Alloyd will be run separately, although both will report to the packaging division of SCA North America. Alloyd management, including Leach, will stay in place in DeKalb. About the only crossover between the companies will be in shared customer lists, O'Leary said.
``They both make custom designed and engineered products for sophisticated end uses,'' O'Leary said. ``But from our point of view, it will be business as usual at Alloyd.''
Alloyd ranked 15th on Plastics News' listing of North American thermoformers for 2002, while Tuscarora ranked 53rd, with an estimated $15 million in relevant sales.