At least three prominent packaging companies are attempting to sell all or parts of their businesses, taking advantage of what many consultants say will be a banner year for mergers and acquisitions.
According to banking and equity-firm sources who have looked at the potential deals, blow molder Liquid Container LP/Plaxicon Co. and container and closures maker Kerr Group Inc. are up for sale. And Pactiv Corp. is attempting to sell its protective packaging and European flexible packaging operations.
Baltimore-based Deutsche Bank AG is shopping Liquid Container and Kerr to potential buyers, while New York's Credit Suisse First Boston LLC is handling the possible Pactiv deal. The firms have prepared presentations and spoken to competitors and financial buyers, sources said.
Deutsche Bank started shopping Kerr in February, while the other two are farther along in the process. Pactiv is into its second round of bids for the two businesses, which the Lake Forest, Ill., company is offering to combine in one bundle, sources said.
Officials at the three plastics companies did not return telephone calls seeking comment.
Whether the deals will be completed is anyone's guess. But sources said the Pactiv and Liquid Container sales are likely, based on the level of interest already generated.
The flood of large packaging companies on the sales block fits with the prevailing view among acquisition experts that 2005 will be a significant year for companies to change hands. Several equity firms said they had other deals in the works, keeping them busier than they have been for the past several years.
``As it is, you see a steadier pace of M&A activity in the packaging world than in other sectors,'' said William Hornell, managing director of Chicago-based equity firm Mesirow Financial Inc.
Hornell had no knowledge of the three possible deals, but said he is working on other sales involving a flexible packaging company and a thermoformer.
``Packaging companies aren't moving offshore, and buyers feel more comfortable about the longevity of the growth trend,'' Hornell said. ``Combine that with the desire of [equity managers] to get their portfolio money invested, and you have a strong revival of interest.''
Indeed, with credit terms loosening, firms do not need as much cash to invest, added Jeff Kolke, vice president of chemicals and plastics with GE Commercial Finance, based in Chicago. Kolke, who did not comment on the three possible deals, said equity firms are chasing many deals right now to cash in on a rising manufacturing economy.
Pactiv already is negotiating with potential buyers in a second round of bidding, sources said, adding that several European packaging companies and global-based equity firms are among those interested.
Publicly held Pactiv's flexible- and protective-packaging unit recorded sales of $958 million in 2004, up 9 percent from the year before. The unit includes its North American flexibles operation, which is not for sale, sources said.
The company has 14 protective-packaging plants in Europe and nine in North America, according to its 2003 annual report. The plants use polyethylene, polypropylene and polystyrene to produce air-encapsulated bubble and foam-sheet products, including mailers.
Five plants in Germany and Egypt make flexible film, bags, labels and pouches for Pactiv's foreign flexible packaging unit, the company reported.
Pactiv considers its consumer and specialty packaging businesses core to its growth. The company's product lines include food bags under the Hefty name and thermoformed trays and lids for restaurant and grocery chains. The company has about 80 plants in 14 countries and recorded sales of $3.38 blllion in 2004.
Other large makers of protective packaging include Sealed Air Corp., Polyair Inter Pack Inc. and SCA Packaging North America. Sources did not know whether those firms are interested in purchasing the Pactiv operation.
The other two potential deals involve outside ownership by equity firms. Liquid Container of West Chicago, Ill., has been owned since 1990 by Mid Oaks Investment LLC of Buffalo Grove, Ill. Its investor group includes Denver-based private-equity firm Gallagher Enterprises LLC. Gallagher has been pushing to sell Liquid Container, said one source familiar with the company. The business has been for sale since late last year.
The firm recorded $270 million in sales for its fiscal year ended July 31, and was 15th on Plastics News' most recent sales-based ranking of North American blow molders. The company makes high density polyethylene and PET bottles for food, household and chemical uses. Liquid Container has 12 manufacturing sites and about 1,100 employees.
The company has attracted some interest from equity firms looking to replace Mid Oaks and Gallagher as lead investors in the business, sources said.
``The company is doing well, and someone will probably want it for its portfolio,'' one source said.
Sales at Liquid Container rose about 15 percent between 2003 and 2004, making the company ripe to command a good multiple in a sale, another source said.
Kerr, based in Lancaster, Pa., was put up for sale in 2000 by its principal owner, investment group Fremont Partners LP of San Francisco. But the fund, an affiliate of holding company Fremont Group, later pulled back from that plan.
Kerr made a large acquisition in 2003, buying the packaging business of spice maker McCormick & Co. The business includes blow molder Setco Inc. and Tubed Products Inc., a maker of plastic squeeze tubes. The move almost doubled Kerr's sales to about $360 million last year and made it a stronger player in blow molded containers, a source said.
While the acquisition quieted thoughts of selling Kerr for awhile, its equity owners decided it may fetch a larger multiple as a bigger business, sources said. Fremont may sell the tubing business separately from Kerr's closures and containers operations.
As a stand-alone unit, the squeeze-tube operation has sales of about $100 million. Potential candidates to buy that business could include rival packaging maker Silgan Holdings Inc., but it is too early to tell whether a sale will be completed, sources cautioned.
Whatever happens, M&A experts warn to fasten your seat belts, as it could be a fast-paced ride for acquisitions in 2005.
``I think we'll have a healthy run for awhile,'' Hornell said.
