Compounding M&A still happening but not as active

Plastics investors still want to dance with compounders and concentrate makers, but the dance floor in late 2023 is a little less crowded than it was in recent years.

"There's still interest in compounders, but there's not a lot of independent guys left," said Keith Rodden, owner of the Compound Solutions LLC consulting firm in Gallatin, Tenn. "Private equity firms are moving more slowly because of higher interest rates, so we could see more compounders buying other compounders."

Relatively speaking, compounding assets in the U.S. are more attractive than those in Europe in the current market, according to Bill Ridenour, president of Polymer Transaction Advisors Inc. in Foxfire, N.C.

"Buyers are concerned about volatility in Europe, where there could be a lot of pitfalls in 2024," he said. "There are a lot more assets to look at in the U.S., even with higher interest rates."

Aurora Plastics and Techmer PM each made recent acquisitions, and officials with those firms said post-deal integration is going well. Streetsboro, Ohio-based Aurora in October 2022 merged with Enviroplas Inc. of Evansville, Ind., merged to create a larger company with a broader product offering.

Aurora's primary products are PVC compounds, while Enviroplas makes compounds based on engineering resins. Aurora CEO Darrell Hughes said that the firm already has seen cross-selling opportunities with materials made by the two. Aurora is majority owned by investment firm Nautic Partners of Providence, R.I.

Techmer of Clinton, Tenn., in August acquired color and additive compounder Advanced Color Technologies LLC of Dalton, Ga. Techmer now plans to close its own plant in Dalton and move machinery and equipment to the ACT site, CEO Mike McHenry said.

Techmer — which makes engineered compounds and color and additive concentrates for plastics and fibers — also will build a new warehouse and technical center at the ACT site, he added. ACT provides specialty colorant and additive systems. Officials said that the acquisition will improve Techmer's customers' experience with added resources in synthetic fibers and other industries.

In September 2022, private equity firm Gryphon Investors of San Francisco bought a majority stake in Techmer. Techmer management and investment firm SK Capital retained minority stakes in the firm. New York-based SK had bought a majority stake in Techmer from founder John Manuck and business partners Rehrig Pacific and Tokyo Ink in July 2020.

Hughes and McHenry each said their firms are looking to make more acquisitions.

"We're actively seeking additional properties, possibly in flexible materials or engineering resins," Hughes added. McHenry said that Techmer "will remain very active" in M&A, even with higher interest rates affecting multiples and valuations.

Several other compounding and concentrates executives contacted by Plastics News also expressed interest in the M&A market.

"We're always open to opportunities, but we do expect higher valuations with higher interest rates, said Andy Ubhi, CEO of Peacock Colors in Addison, Ill.

"We'll look to grow [through M&A], but there are some challenges on where some businesses stand today," said Shruti Singhal, CEO of Chroma Color Corp. in McHenry, Ill. Geon Performance Solutions of Westlake, Ohio, "will look to capitalize" on M&A opportunities in 2024, according to chief marketing officer Wendy Herbst. "It depends on availability and how you get to a valuation," she said.

The evergreen nature of the materials market also can be a challenge in M&A, according to Phil Karig, principal with the Mathelin Bay Associates consulting firm in St. Louis.

"Masterbatch makers and colorants makers are attractive to investors, but the but issue is if you knock someone out of the market by acquiring them, they can pop up with an extruder and a pelletizer six months later," he said.

Other compounding/concentrates deals to hit the market since mid-2022 include:

• Italian compounder Taro Plast SpA acquired compounder and resin distributor Delta Polymers. Sterling Heights, Mich.-based Delta operates its compounding unit as Amplas Compounding. Most materials compounded by Delta are based on engineering resins.

Delta was owned by the Beaupre family. Del Beaupre founded the firm in 1978. The deal was the second one in the U.S. in less than six months for Soragna, Italy-based Taro Plast. In October, the firm acquired the copolyester business of Celanese Corp.

• Antek Madison Plastics purchased a materials plant in Stryker, Ohio, from LyondellBasell Industries. Toronto-based Antek Madison is a resin distributor and recycler. The firm is using the Stryker site for pulverizing resins for rotational molding and blending resins for custom color and concentrates.

LyondellBasell picked up the Stryker site as part of its deal for A. Schulman Inc. in 2018. It had been vacant for about a year until the Antek Madison offer.

• In a sustainability-driven deal, Teknor Apex Co. acquired PVC recycler Nu-Pro Polymers Inc. Nu-Pro of Wheeling, Ill., makes reprocessed and recycled flexible PVC compounds. Officials with Teknor Apex in Pawtucket, R.I., said those materials "provide a reliable and new sustainable material option."

• Sweden-based Hexpol Group signed an agreement to acquire compounder McCann Plastics LLC from the McCann family for $120 million. McCann specializes in niche compounds for rotational molding and other applications.

North Canton, Ohio-based McCann has two Ohio locations with 100 employees. Its main end markets are general industry, agriculture and the fast growth segment of specialized cooling boxes. Hexpol, based in Malmö, has 19 sites in the U.S. with thermoplastics, thermoplastic elastomer and rubber compounding.

Hexpol followed that up in November with the acquisition of 100 percent of Star Thermoplastic Alloy and Rubbers Inc., a Chicago-area thermoplastic elastomers supplier.

• Prism Worldwide LLC, a recycler of waste tires into new elastomers, acquired compounder CRC Polymer Systems Inc. The acquisition of CRC expands Kirkland, Wash.-based Prism's capacity for product development, compounding, blending and distribution throughout North America.