Ampac Holdings to merge with Prolamina

Standard & Poor's Ratings Services reported July 24 that private equity firm Wellspring Capital Management LLC is buying Ampac Holdings LLC and will merge Ampac with Wellspring's Prolamina Corp. to create a flexible packaging group.

In a news release, S&P said Wellspring will create a company called Prolampac Intermediate Corp.

Contacted soon after S&P announced the deal, a spokesman for Wellspring in New York said no one was available for comment. Officials of Ampac and Prolamina did not return telephone calls.

Ampac is based in Cincinnati and has five U.S. factories, in Cincinnati; Auburn, Wash.; Minneapolis; Cary, Ill.; and Hanover Park, Ill. According to Plastics News' most recent ranking, Ampac generated estimated film packaging sales of $154 million.

Westfield, Mass.-based Prolamina generated an estimated $300 million in sales from three factories, in Westfield; Neenah, Wis., and Terrebonne, Quebec. Prolamina officials broke ground July 1 on a renovation of the Westfield headquarters plant.

The Plastics News rankings include only the plastic film operations. The companies also use paper and some other materials. S&P said the two companies have pro forma sales of nearly $700 million for the last 12 months, ended June 30.

S&P gave a “B” corporate credit rating to the new Prolampac for what the service reports was $450 million in senior secured first-lien credit facilities from the company and its subsidiary borrowers, and a “CCC+” rating to the companies' proposed $110 million senior secured second-lien term loan.

S&P said that stable outlook reflects its expectations that Prolampac's leverage will gradually decline over the next 12 to 18 months, as its profit margins improve because of cost savings from the proposed merger.

Packaging has been the hottest area for mergers and acquisitions. S&P credit analyst Jaissy Lorenzo said Promlampac “will operate in the highly fragmented and competitive flexible packaging industry.” Lorenzo said the company is a midsize packaging player.

“The company is also exposed to volatile raw material costs. These factors are partially offset by the company's long-standing and mostly contractual relationships with its well-established customers, its exposure the relatively stable food, consumer products and medical end markets, and its good market positions in certain industry niches,” Lorenzo said.