(July 21, 2008) — It may be a bit hard to believe, given all the bad news we see every day about rising resin prices and battered end markets like the automotive industry. But there are many investors who want to own North American plastics companies.
Think about it. If you had a few million dollars — or more — to invest, would you put them into a plastics company right now? More than a few people think that's the best place to put their treasure.
According to the experts quoted in our July 14 Mergers & Acquisitions Special Report, plastics industry M&A activity both globally and in North America is on the rise in 2008, compared with last year. That's especially notable because overall — meaning not just in plastics — M&A volume is slowing.
The statistics don't tell the whole story, of course. Some of the acquisitions are of distressed companies. Some are the result of bargain hunters from overseas buying U.S. assets cheaply, thanks to the weak U.S. dollar.
But the bottom line is that a surprising number of plastics processor deals are happening and more will be announced before year's end, according to our sources. Plastics industry consolidation is likely to continue despite the economic slowdown.
Unfortunately, not all the deals have happy endings. One unsettling trend in the past year has been the number of announced deals that fall apart before closing, including GS Capital Partners' $1 billion offer for Myers Industries Inc. and Hexion Specialty Chemicals Inc.'s $10.6 billion offer for Huntsman Corp. And even some of the deals that do close don't turn out so well.
But many of the most successful companies that we report on every week got to where they are because they had a good M&A strategy. The bottom line is, there's smart money betting on plastics processing right now, and we consider that good news.
Bocchi defending PVC
Greg Bocchi, president and chief executive officer of the Vinyl Institute, has hit the ground running.
Not that he had any choice. Bocchi joined the Arlington, Va.-based VI two months ago, and right away he had to deal with a proposal to ban PVC packaging in California, and activist campaigns to convince retailers to stop selling vinyl products including lunch boxes, baby bibs and shower curtains.
Bocchi, a former chief staff executive at the Powder Coating Institute, told our Washington-based staff reporter Mike Verespej that VI is trying to get retailers to take a long-term view, rather than caving in to pressure to get rid of vinyl products.
Bocchi also understands that competition from other materials — including other plastics — is part of the territory. He wants PVC to stand on its merits — and he reminds others that although vinyl is the target today, members of the plastics industry might be well-served by standing together.
There are some significant changes happening at VI. But at the same time, the group continues to depend on its core group of members and supporting members for backing.