Pregis LLC is acquiring Sharp Packaging Systems Inc. in a deal that helps the company delve deeper in the electronic commerce packaging business.
Pregis figures the acquisition of Sharp will increase yearly sales by about 10 percent, but the company's CEO sees the transaction as a “needle mover.”
Sharp makes flexible packaging bagging equipment, blows film and manufactures bags to help the electronic retailers fulfill and ship orders.
Deerfield, Ill.-based Pregis makes its money by creating products and systems to help protect shipments. This includes void fill such as air pillows, paper-based materials, and foam solutions that help prevent products from moving around in boxes during shipment.
But with changes in how retailers are charged by shipping companies, more and more are looking at shrinking the size of their packages to save money. Companies like UPS and FedEx now charge by the size of the package instead of the weight.
Sharp Packaging's approach helps Pregis break into the bag-based shipping business and allows them to follow their customers who have added that approach.
“Our customers are growing and they are needing new solutions,” CEO Kevin Baudhuin said. “It's a solution our existing customers are asking for and are currently doing.”
Pregis actually has been eyeing Sharp for almost a decade, but only could make a deal following construction of a new 160,00-square-foot manufacturing facility in Sussex, Wis., last year by its previous owners.
“Before that, they weren't ready to sell. They had a mission and a vision to take Sharp to the next level. To me, I view it as a handoff where they took it to the next level and they have a new owner that has the opportunity to maximize the sales channel,” he said.
“It's a good fit for growth after they built the foundation, so I think it's very strategic,” Baudhuin said.
Pregis and Sharp have a lot of overlapping customers, the CEO said. “This is really one where it allows us to provide another solution other than just void fill in the box.”
“There's a big advantage for trying to reduce the size of your packaging from just a cost perspective,” Pregis spokeswoman Dache Davidson said. “That's the motivator for those e-retailers to try to reduce the size.”
Pregis was founded more than 50 years ago with an initial focus on foam, bubble and mailers, which is still an important part of the business.
“We still get excited about our core business of foam, bubble and mailers. Unfortunately, that has been suffering a little bit from downward price pressure and also rising costs,” Baudhuin said.
Baudhuin said Pregis sales will be about $600 million per year with the acquisition.
“More and more of our revenue is solutions-based products now. I do think this is a needle mover. It's a platform to provide solutions for automation,” he said.
“When you look at this e-commerce space, it's double-digit growth. So if we see another add-on in that space, we'll be very interested,” Baudhuin said.
Along with Sussex, the company also has manufacturing sites in Tempe, Ariz., and East Troy, Wis. Sharp has about 200 employees, and current President Mike Menz will continue to lead the business.
Pregis, owned by private equity firm Olympus Partners, has made four acquisitions in two years, Baudhuin said. They include the protective films business of 3M Co., Eagle Film Extruders, and a paper-based protective packaging systems company.
