CCL Industries Inc. will fortify its position as a manufacturer of plastic label stock by acquiring Treofan businesses in North America and Latin America.
CCL said March 8 that it agreed to pay about $255 milllion for Treofan America Inc. and Trespaphan Mexico Holdings GmbH. When it finalizes the deal in the second quarter, CCL will fold the operations into the Innovia business it acquired in early 2017.
The purchase price of the businesses is equal to 6.4 times their earnings before interest, taxes, depreciation and amortization.
CCL officials told analysts in a March 9 conference call that the target assets are "best in class" in the Americas. The deal expands the geographical footprint and economics of scale of Innovia. They stressed the management team has broad experience and no strong ties to the former owner of the assets.
CCL will get Treofan expertise in cavitated film for labels and packaging and its emphasis on wrap-around and in-mold decoration. Innovia has been targeting pressure-sensitive labels. The combination covers the major label growth technologies with the exception of sleeves. Treofan's research and development strengths will gain from Innovia's top-coating technologies. CCL sees big synergies in procurement with the flexibility to source resins in the United States or Europe. CCL told analysts there is limited overlap between customers of Treofan and Innovia.
Through the deal CCL will get a major production plant for biaxially oriented polypropylene in Zacapu, Mexico, and inherit an expansion program underway at the facility. Its Innovia business already runs BOPP extrusion plants in Atlanta, the United Kingdom, Belgium, Australia and Mexico.
The Treofan operations being purchased had sales of about $212 million last year. Innovia's sales in North America are a bit higher but its global annual sales were about $570 million when CCL bought it.
In addition to more BOPP production capacity, CCL expands its tool kit for making BOPP. Treofan's production is based on stenter technology in which polypropylene resin is cast extruded into a film that is stretched in the machine direction and then the transverse direction to attain orientation. Innovia's BOPP output is made in a blown film system whereby the film "bubble" is stretched by air pressure to create orientation.
The Treofan Zacapu factory now has capacity to make 132 million pounds per year of BOPP. About 65 percent of the output is sold in the United States where Treofan America LLC runs a sales and distribution center in Winston-Salem, N.C. The rest is mostly sold in Latin America.
Plastics News data estimates Atlanta-based CCL subsidiary Innovia Films Inc. has annual sales of about $220 million.
Late this year Treofan's Zacapu operation will install a new Brückner five-layer, 32-foot wide BOPP system. When the new line begins production in the first half of 2019, it will hike the operation's BOPP capacity by 66 million pounds per year, or 50 percent. The project Is due for completion in late 2018, CCL officials told analysts. Including the addition of 70,000 square feet more floor space, the project is a $65 million investment. CCL will reimburse the former owner for the amount spent so far and shepherd the expansion to completion.
"The proposed acquisition gives Innovia a solid strategic footprint for BOPP films in both North America and Europe with highly complementary technologies and products," noted CCL President and CEO Geoffrey Martin in a news release.
The acquired Treofan businesses will be combined with Innovia's operations in the Americas under the Innovia brand name. Guenther Birkner will head the business, adding to his responsibilities for CCL's global labels business in food, beverage, healthcare and specialty markets.
Treofan's sales in the Americas had an estimated EBITDA of $40 million last year.
CCL inked the purchase agreement with M&C SpA of Milan, Italy. The former parent will continue with its stake in European BOPP markets through Treofan Germany GmbH & Co. KG and Treofan Italy SpA, neither of which is involved in the transaction. Acquired entities will trade under the Innovia brand name while M&C SpA will retain rights to the Treofan name.