IPL Plastics Inc., a major injection molder of pails and other rigid packaging, has agreed to be purchased by Chicago-based private equity firm Madison Dearborn Partners LLC.
IPL is based in Montreal and has been publicly traded on Toronto's stock exchange since 2018. But the shares have underperformed since the IPO.
"We have concluded that this transaction is in the best interests of IPLP and fair to our shareholders," said Rose Hynes, an IPL director and chair of a special committee that assessed the bid.
"With a view to maximizing shareholder value, we conducted a thorough assessment of MDP's proposal, as well as other alternatives reasonably available to the company, including the status quo," Hynes said.
Madison Dearborn agreed to pay C$10 per share for the company, which values IPL at C$555 million. That's 26 percent less than the C$13.50 that shareholders paid for the company when it filed the IPO, but a 49 percent premium from the stock's closing trade of C$6.70 on July 28.
Investors have been anticipating a deal, however. IPL shares had been as low as C$3.35 in March, before published news reports that private equity firms were interested in buying the company.
The deal is subject to approval from at least two-thirds of IPL shareholders, and the company has a 30-day window to entertain a better offer, known as a "go shop" provision.
Scott Fromson, an analyst with CIBC World Markets, noted that Madison Dearborn's all-cash offer values the company at a multiple of about nine times earnings before interest, depreciation and amortization (EBITDA). He estimates the deal will close in late October.
IPL is a leading supplier of in-mold labeled packaging and bulk plastic containers that has been actively consolidating that highly fragmented sector, acquiring five major plastics molders since 2014. The company dates back to 1939 when IPL was founded as a small manufacturer of household items.
Recent North American acquisitions included Encore Plastics Corp. of Sandusky, Ohio, in 2016 and Macro Plastics Inc. of Fairfield, Calif., in 2017.
Dublin-based molder One51 plc bought a majority stake in IPL in 2015 and changed its name to IPL Plastics in 2017. Around 2,000 small Irish investors still own shares in the company, but the majority stakeholder has been Caisse de Dépôt et Placement du Québec, an institutional investor that manages pension plans.
IPL has 14 manufacturing facilities in North America, Europe and China that are equipped with more than 400 molding machines.
The company ranked No. 21 in the most recent Plastics News survey of North American injection molders, with estimated molding sales in the region of US$405 million. It has eight plants, 2,000 employees and 212 molding presses in North America, according to PN data.
IPL is a significant user of post-consumer resins and has highlighted itself as a leader in sustainable packaging.