Boston private equity group Bain Capital Partners LLC will purchase Consolidated Container Co. LLC, a major packaging blow molder that employs 2,100 and runs 59 factories in North America.
Bain will buy Consolidated Container from Vestar Capital Partners and other investors, in a deal announced May 31. Terms were not disclosed for the sale, which is expected to close in the third quarter.
Jeffrey Greene, CEO of Atlanta-based Consolidated Container, said Bain will help the company invest in “product development, technology, greenfield facilities and acquisitions.”
Consolidated Container specializes in mid- and short-run packaging, serving a diverse customer base in dairy, water, beverage, food, household chemical, automotive and industrial chemical markets.
Consolidated Container was one of the big packaging container merger stories of the 1990s. Vestar Capital Partners, a New York private equity firm, bought Reid Plastics Inc., then acquired a majority stake in the packaging group of Suiza Foods Corp. in 1999 — a blockbuster deal that created the giant new blow molding conglomerate, renamed Consolidated Container.
The mid-to-late 1990s was a time of rapid-fire consolidation in the U.S. packaging business — as deep-pocketed private equity companies discovered plastics packaging.
Vestar's ownership period is exceptionally long for a private equity firm. Since its creation in 1999, Consolidated Container has continued to make acquisitions, and today claims to produce more than 4 billion bottles a year. Standard & Poor's said about half of its total sales come from dairy and water packaging.
The company ranks as the fifth-largest blow molder in North America, according to the most recent Plastics News ranking. A spokesman said Consolidated Container had 2011 sales of $738 million.
Analyst John Hart of P&M Corporate Finance LLC, said Consolidated Container made nine acquisitions since 1999. He said the series of acquisitions has resulted in a high debt level.
“We calculate they have roughly $600 million in debt,” said Hart, who is director of the plastics and packaging group at P&M in Southfield, Mich.
Hart said Consolidated Container has a ratio of debt to earnings before interest, taxes, depreciation and amortization of just over six times EBITDA. He said that ratio is similar to Berry Plastics Group Inc., which has filed to go public.
Citing possible debt concerns, Standard & Poor's said it has placed Consolidated Container's “B” corporate credit rating on CreditWatch with negative implications.
“The CreditWatch listing reflects the potential for a downgrade if increased debt results in a material deterioration of Consolidated Container's financial risk profile,” said S&P credit analyst Henry Fukuchi. He said S&P could affirm the ratings after a review, if business conditions and leverage remain stable or if the higher debt is not meaningful enough to cause a lower rating.
Representatives for Consolidated Container, Vestar and Bain Capital said the companies would not comment beyond the news release because the deal has not closed.
Market analyst Polymer Transaction Advisors Inc. predicts Bain Capital will bulk up on more packaging.
“My take is they'll look for another major acquisition in the near future,” said Bill Ridenour, president of Polymer Transaction Advisors Inc. of Newbury, Ohio.
“It could be another major blow molder or it could be someone in the injection molding and processing industry that uses the same raw materials or has the same customers,” he said.