AND TRENDS M&A ACTIVITY PUBLIC COMPANY VALUATIONS SPOT ON FLEXIBLE PACKAGING

Transcription

1 SPOT ON FLEXIBLE PACKAGING Thomas Jungreithmeir, Oaklins' flexible packaging specialist, is pleased to share some highlevel industry intelligence in this first edition of Spot On. "The global flexible packaging industry is a highly dynamic market in continuous consolidation. Structural market and growth drivers include changes in purchaser demographics, economic factors and lifestyle changes. Customers are increasingly purchasing smaller quantities, which leads to a greater demand for packaging materials. In addition, as product differentiation becomes more vital, the demand on packaging producers increases. Added to these demands are other packaging MARKET DESCRIPTION AND TRENDS Increased global wealth Population growth Industry 4.0 requirements such as weight, barrier qualities and product shelf life. Valuation trends have been positive in the flexible packaging market overall, especially for companies that focus on growth application markets such as pharmaceuticals. M&A activity in the flexible packaging industry is characterized by a strong crossborder focus that accounts for 65% of all transactions. In 2016, M&A activity in the sector hit a peak and the number of closed transactions for early 2018 are also promising. It s not a coincidence that M&A activities are again achieving high volume in numbers as consolidation pressure continues to increase." M&A TRENDS Change in consumer behavior The global flexible packaging market is valued at over US$90 billion with the highest worldwide demand focused in North America and Central and East Asia Page 2 Page 3 PUBLIC COMPANY VALUATIONS M&A ACTIVITY Company Country Valuation metrics (US$) Operating parameters (US$) Market capitalization TEV/ Revenues TEV/ TEV/EBIT Revenues 12, x 11.41x 15.32x 9, , % Bemis Company Inc 3, x 9.80x 14.27x 4, % CCL Industries Inc 7, x 14.16x 19.36x 3, % 8.6% Amcor Ltd Ergis SA Huhtamaki Oyj Nampak Ltd margin x 5.75x 9.78x , x 3, x 6.03x 8.20x 1, % 1.51x 9.14x 14.33x 3, % 2.22x 4,411.8 RPC Group PLC 4,306.5 Sealed Air Corp 7,228.4 Page 5 35% 65% Domestic Crossborder Page 6

2 Market description and trends Flexible packaging definition and strategic success factors Flexible packaging includes materials that are either reel fed, cut in format or punched that are in direct contact with the filling goods Also included are labels for beer, soft drinks, food, nonfood household and inmold labels The filling goods can be dairy, confectionery, biscuits, snacks, dried food, coffee, wet food, chilled food, pet food, pharma, medical, personal care, household care, tobacco, gardening, agricultural or industrial Global strategic success factors in the packaging industry: ability to provide high quality products ability to continuously reduce unit cost commitment to top performance ability to innovate & change unsurpassed speed to market ability to speak the customers language efficient supply chain management Thomas Jungreithmeir, Flexible Packaging Specialist, Oaklins "The high level of consolidation on the client side and the investment requirements in the flexible packaging space put significant pressure on small and mediumsized companies in particular. We thus expect further intense M&A activity in the coming 12 months and beyond. 2

3 Market description and trends The flexible packaging market The global flexible packaging market is valued at over US$90 billion with the highest worldwide demand focused in North America and Central and East Asia. Within Europe, the major market for flexible packaging is Western Europe, which accounts for approximately 80% of total European demand. However, growth rates are highest in Eastern Europe, with increasing rates of 2.8% p.a. versus 1.8% p.a. in Western Europe (CAGR from ). Food packaging makes up the largest share by application, accounting for around 75% of the European converted flexible packaging market. The major current drivers in the food packaging market are: product requirements (easy to open, reclose, ready to eat) product freshness sustainability In terms of market players, the flexible packaging market is characterized by a few larger players, with the top 10 accounting for about 50% of the market. Consolidation pressures are increasing, especially for small and mediumsized players. Key trends and drivers in the packaging industry Increasing global wealth Industry 4.0 Growth in disposable income, especially in developing countries, increases the demand for innovative packaging solutions for meat products and sweets Trends are moving towards complete integration of the production process which includes logistics, suppliers and customers (registration, tracking, inventory, billing/payment) Population growth Change in consumer behavior Global population growth spurs demand for packaging solutions in various consumer groups There is an increased call for smaller package sizes, complex and innovative nutrition standards and a growing proportion of prepared food options and delivery food services via the internet 3

4 Market description and trends M&A drivers in the packaging industry sellers market demand for fullrange suppliers new technologies and additional output in the Middle East and China consolidation in the consumer goods segment market power increasing requirements global coverage Small and mediumsized enterprises face size pressure. They need to invest and adjust their strategy to fit the current major packaging trends and enter the growth markets. The current major drivers in the flexible packaging industry include the trend towards single serve packaging, which is affecting the design of products; the general, continuous switch from rigid to flexible packaging, which is leading to further increased market share for flexible packaging products; and the increasing demand for highmargin products within the pharma industry, which contribute to margin growth and a growing share of flexible packaging in the market. Single serve packaging Switch from rigid to flexible packaging (increasing share) Increasing demand in pharma packaging (high margins) 4

5 Public company valuations Peer group and valuations Company Country Valuation metrics (US$) Operating parameters (US$) Market capitalization TEV/ Revenues TEV/ TEV/EBIT Revenues margin 12, x 11.36x 15.26x 9, , % Bemis Company Inc 3, x 9.76x 13.95x 4, % CCL Industries Inc 7, x 14.27x 19.16x 3, % x 5.43x 9.10x % 4, x 10.98x 15.55x 3, % 13, x 8.89x 12.95x 8, , % x 5.74x 7.81x 1, % RPC Group PLC 4, x 9.38x 14.70x 3, % Sealed Air Corp 7, x 13.78x 17.16x 4, % Sonoco Products Co 4, x 10.22x 15.54x 5, % Tredegar Corp x 9.57x 17.33x % Uflex Ltd x 3.30x 5.19x 1, % 2, x 10.37x 12.89x % Max 2.76x 14.27x 19.16x Min 0.41x 3.30x 5.19x Mean 1.50x 9.47x 13.58x Median 1.53x 9.76x 14.70x Amcor Ltd Ergis SA Huhtamaki Oyj Mondi PLC Nampak Ltd Winpak Ltd Source: Thomson Reuters, Oaklins research Spot On Flexible Packaging 1st edition May

6 M&A activity M&A activity in Europe The majority of the global flexible packaging M&A transactions were crossborder, as visible in the graph below. This suggests that flexible packaging is a globally relevant topic in more than just a few countries. Still, 35% of activity was related to domestic transactions, which illustrates that interest in domestic market consolidation continues to be relevant. In each of the past three years there were more than 20 transactions in the flexible packaging sector. A peak was achieved in 2016 with 29 transactions and in the first quarter of 2018 seven transactions have already been closed or announced. Early trends for this year seem to suggest that we will end 2018 with more than 20 transactions and that interest in expansion or market consolidation is still available for companies worldwide. Transactions Number of transactions by year 35% Domestic % Crossborder (so far) Source: Mergermarket, Oaklins research Source: Mergermarket, Oaklins research To generate growth despite industry s growth rates being largely tied to GDP growth, flexible packaging companies have been quite aggressive in their acquisition efforts in the past. The market and consolidation efforts are focused on a global playfield, as the large share of crossborder deals also indicates. 6

7 Recent M&A activity Selected Oaklins' flexible packaging transactions Case study Jokey Plastik Wipperfürth GmbH (Jokey Plastik) has expanded its presence in Spain through the acquisition of TREPLAS, S.L., one of the most relevant players in the Spanish plastic injection moulding sector. TREPLAS, owned by the Rubio Ruiz family since 1971, develops plastic packaging products across three business segments: food and beverage, household goods, and cosmetics and personal care, using a plastic injection moulding process. Founded in 1968, Jokey Plastik designs, develops and manufactures plastic packaging solutions for the filling industry in Germany. The company offers plastic containers, tubs, bowls, buckets, boxes, and trays, as well as various accessories for additional removal, handling, and portioning options, and singlerim closure systems with tamperevident seal and cover lifting protection. Oaklins' team in Spain acted as advisor to the Rubio Ruiz family in the design, negotiation and execution of the transaction. 7

8 About Oaklins MEET OAKLINS, THE WORLD S MOST EXPERIENCED MIDMARKET M&A ADVISOR 700 professionals 60 offices 40 countries 5,000+ transactions 15 sectors Oaklins offers a comprehensive range of services M&A advisory (buy and sellside) Growth equity and equity capital markets advisory Debt advisory Corporate finance services Oaklins industry specialists Flexible packaging is one of our focus areas. Combining comprehensive sector knowledge with global execution has led Oaklins to become the most experienced M&A advisor in the flexible packaging sector, with a large contact network of the most relevant market players worldwide. This results in the best possible merger, acquisition and divestment opportunities for flexible packaging companies. If mergers, acquisitions or divestitures of businesses or business units are part of your strategy, we would welcome the opportunity to exchange ideas with you. Please find our contact details below. Thomas Jungreithmeir, Managing Partner Vienna, Austria T: Davide Milano, Partner Turin, Italy T:

9 Oaklins our offices around the world Disclaimer This document is provided for information purposes only. Oaklins and its member firms make no guarantee, representation or warranty of any kind regarding the timeliness, accuracy or completeness of its content. This document is not intended to convey investment advice or solicit investments of any kind whatsoever. No investment decisions should be taken based on the contents and views expressed herein. Oaklins and its member firms shall not be responsible for any loss sustained by any person who relies on this publication Oaklins. All rights reserved. Oaklins is the collective trade name of independent member firms affiliated with Oaklins International Inc. For details of the nature of affiliation, please refer to