Conwed Plastics is being sold by its long-time owner in a $295 million deal that has the potential to go even higher.
Schweitzer-Mauduit International Inc. is acquiring the Minneapolis-based maker of plastic netting from Leucadia National Corp. in a transaction expected to finalize in January.
Conwed “complements our existing operations and is expected to be our most synergistic transaction to date. Conwed, a leader in engineering netting, expands our existing technology,” Schweitzer-Mauduit CEO Frederic Villoutreix said on a conference call to discuss the deal.
“This transaction crates a clear global leader in engineered netting and the integration with our AMS [Advanced Materials & Structures] segment is expected to drive significant synergies as we optimize our footprint and improve operations,” he said.
This latest deal follows Schweitzer-Mauduit's acquisition of DelStar Technologies Inc. in 2013, a maker of thermoplastic nets, nonwovens, laminates and extruded components.
Villoutreix said his company has considered Conwed an acquisition target since buying DelStar.
"With Conwed's assets and technologies, which are similar to DelStar's, SWM will become the clear global leader in resin-based netting with best-in-class operations and products, and strong positions in several attractive niche applications,” Villoutreix said in a statement.
Along with the initial purchase price, the new owners also agreed to pay up to an additional $40 million over five years based on how Conwed subsidiary Filtrexx International performs.
“Conwed has been a solid Leucadia business for over 30 years. However, SWM approached us as a compelling buyer and we agreed,” CEO Rich Handler and President Brian Friedman said in a joint statement.
Conwed has made lightweight plastic netting for more than 45 years and serves industries including agriculture, automotive, building and construction, consumer, filtration, hygiene, medical and packaging.
Schweitzer-Mauduit expects to gain $75 million in tax benefits through the deal, bringing the after-tax economic cost of the deal to about $220 million.
Conwed has five global manufacturing sites. Sales are about $140 million annually with yearly growth of 3 to 4 percent, Schweitzer-Mauduit said. Production takes place in Minneapolis; Athens, Ga.; Roanoke, Va.; Chicago and Genk, Belgium.
Earnings before interest, taxes, depreciation and amortization are about 20 percent. Joining operations will save about $10 million annually by the end of the second year of the combination.
Conwed gets about 40 percent of its sales from the infrastructure market and another 30 percent from the construction market, Villoutreix said on the conference call. The infrastructure market includes erosion and sediment control products and filled socks used in the oil and gas, construction and storm water management segments. Building construction applications include carpet backing as well as turf netting used in sod production.
Conwed's remaining 30 percent of sales comes from filtration, packaging and consumer products.