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M&A Quarterly

For additional information or inquiries, please contact one of our team members:

plastics.pmcf.com

PLASTICS & PACKAGING FIRST QUARTER 2014

John D. Hart248.223.3468 [email protected]

Matt [email protected]

Ryan R. Shuchman248.603.5372 [email protected]

James R. [email protected]

Daniel M. Ratliff [email protected]

Scott S. [email protected]

About PMCFP&M Corporate Finance (“PMCF”) is an investment banking firm, focused exclu-sively on middle market transactions, with professionals in Chicago, Detroit, and across the globe through Corporate Finance International affiliates. Our dedi-cated Plastics and Packaging Group has deep industry knowledge and covers a wide range of processes including thermoforming, sheet and film extrusion, blow molding, injection molding, and resin and color compounding. Offering a breadth of advisory services, the Plastics and Packaging Group has helped clients world-wide meet their sale, acquisition, financing, and strategic growth objectives.

Investment Banking Services:• Mergers & Acquisitions• Sales & Divestitures• Capital Raising• Sale Planning

CHICAGO225 W. Washington Street, Suite 2700Chicago, IL 60606312.602.3600

DETROIT26300 Northwestern Highway, Suite 120Southfield, MI 48076248.603.5300

PMCF Transaction Announcements

Packaging: Medical Injection & Blow Molding

Recapitalization with Private Equity

Packaging: Industrial Structural Foam

Private Equity Divestiture

Packaging: Food Injection Molding

Strategic Acquisition Advisory

has been acquired by

a portfolio company of

has acquired

plastics.pmcf.com

M&A Quarterly – Plastics & Packaging

2

Following a strong finish to the year for plastics and packaging M&A in 2013, transaction volume remained steady in Q1 2014. At 92 transactions for the first quar-ter of 2014, deal activity matched volume in Q4 2013. The quarter posted a year-over-year increase in M&A of 25 deals to total 92 transactions, as compared to only 67 deals in Q1 2013. Q1 2014’s volume reflects a second consecutive quarter of deal flow above the quarterly aver-age from the past three years and the fourth consecutive quarter where activity remained flat or increased.

Sustained Q1 2014 M&A activity reflects the attractive market conditions that were present through the second half of 2013. The first quarter of 2014 represents an ac-tive M&A environment with buyers and sellers competing against the backdrop of relatively stable North American, European, and Asian economic data. With these factors, plus attractive conditions in the equity markets, con-tinued low-cost debt, and undeployed capital and cash reserves, the plastics and packaging sector will likely re-main a focus for strategic and financial buyers while of-fering interested sellers attractive valuations. We believe that Q1 2014 is a positive sign for plastic and packaging M&A in 2014 and the sector holds the potential for continued, steady deal flow.

Key Q1 2014 plastics and packaging M&A trends included the following::

• Strategic buyers remain the most active buyer segment, accounting for nearly 70% of trans-actions in the first quarter, while private equity deals were split evenly among platform and add-on acquisitions

• Deal activity by processor type reflected injection molding and resin & compounding deals experiencing the largest growth, up 9 and 7 deals, respectively

• In terms of product type, packaging deals including rigid, flexible, bottles, and closures, accounted for approximately 25% of transactions in the first quarter despite declining by 3 deals versus Q1 2013

• Custom molding and industrial plastics M&A experienced the largest year-over-year growth through Q1 2014 while rigid packaging, consumer, and building products deals each had moderate declines

• PMCF’s index of plastic and packaging publicly traded companies outperformed the S&P 500 index slightly during the first quarter of 2014

Key transactions for the quarter included the following:

• Montagu Private Equity acquired the Pharmaceutical Devices & Prescription Retail Pack-aging division of Rexam plc (LSE:REX) for $805 million

• Mattel, Inc. (NasdaqGS:MAT) acquired injection molded toy company MEGA Brands, Inc. (TSX:MB) for $449 million or 9.6x EBITDA

• Berry Plastics Group (NYSE:BERY) acquired the Healthcare Containers & Closures busi-ness from Rexam plc (LSE:REX) for $135 million and an estimated 7.1x EBITDA

• Plastipak Packaging, Inc. acquired Constar International for approximately $102 million purchasing the assets out of bankruptcy

• Private equity firm The Watermill Group acquired The Plastics Group from its long-term private equity owners for an undisclosed amount

Current market conditions allow for buyers to remain aggressive, and accordingly, we view M&A activity levels as limited effectively by the number of willing sellers. While some segments are increasingly consol-idated, such as blow molded packaging, most plastic packaging sectors feature numerous small and mid-size suppliers that may desire a shareholder exit. With the current favorable multiples for at-tractive businesses in mind, we believe these conditions will likely continue to drive seller volume in the near future.

Strategic Financial Add-On Financial Platform

0

50

100

150

200

250

300

400

350

20102009 2011 2012 2013

Num

ber

of D

eals

Q1 YTD ’14

266220 235 213

64

60

5568

56

14

67

7279

59

14

393

347

382

328

Q1 YTD ’13

47101067

92199

61

80

340

Q1 2014 Market Summary & Outlook

Q1 2014

Q1 2013

Rigid Packaging16%

Resin18%

Custom Molding22%

16%

Flexible Packaging

6%Industrial

6%Consumer

11%

Building Products

Bottles3%

Closures2%

Sector

Injection Molding

Blow Molding

Film

Resin/Color & Compounding

Sheet & Thermoforming

Specialty

Total

2012 2013Q1 YTD

‘13% of Total

Q1 YTD‘14

% ofTotal

‘13 – ’14Change

%Change

30 22 5 7% 8 9% 3 60%

110 86 18 27% 27 29% 9 50%

68 60 13 19% 13 14% 0 0%

62 68 12 18% 19 21% 7 58%

32 38 7 10% 7 8% 0 0%80 54 12 18% 18 20% 6 50%

382 328 67 100% 92 100% 25 37%

Source: P&M Corporate Finance, Company Reports

Flexible

Rigid Packaging7%

Industrial15%

Resin18%

Custom Molding36%

Flexible Packaging

9%Bottles

7%

Closures2%

Consumer1%

Building Products 5%

Transactions by Product Segment

M&A Quarterly – First Quarter 2014

PMCF

3

Global Plastic Packaging M&A

Trends in M&A:• Plastic packaging M&A declined by three deals, or 12%, in Q1 2014 versus activity experienced in the same period one year earlier• While overall transaction levels were down slightly by three transactions to 22 deals, private equity buyers buying activity re-

mained flat year-over-year at 8 transactions• Food & beverage and consumer packaging transactions each posted growth in Q1 2014 vs Q1 2013, increasing by 2 and 1 deals,

respectively, while industrial, medical, and electronics packaging activity were each down compared to Q1 2013

Transactions by Buyer Type Transactions by End Market

66

48

114

178

25

148

2265

53

118

80

51

131

0

20

40

60

80

100

120

140

2010 2011 2012

Strategic Financial

Num

ber

of D

eals

Q1 YTD '13

Q1 YTD '14

2013

71

47

118 Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

9

9

2

-

4

-

-

1

25

11

5

3

-

3

-

-

-

22

Q1 YTD '13 Q1 YTD '14

Industry News:

• February 2014 – In a February speech to attendees of The Packaging Conference in Orlando, FL Michael Okoroafor discussed the potential for creating plastic bottles from 100% plant-based materials by 2018. Okoroafor, Vice President of Global Packaging In-novation for H.J. Heinz Co., is part of the Plant PET Technology Collaborative (PTC), which includes representatives from some of the largest global companies working together to increase the percentage of plant based material in PET. During his speech Okoro-afor noted the PlantBottles that have been manufactured by Coca-Cola for several years, but these only include 30% plant-based materials. The PTC believes that while bottles from 100% plant materials are already possible in a lab, the group will be able to develop a way to create these on a commercial scale by 2018.

• January 2014 – According to a new report released by Guilsborough, England-based PCI Films Consulting, Ltd., demand for flex-ible packaging in North America will reach approximately $25 billion by 2018. In 2013, the market totaled $20.7 billion, which represented approximately 30% of global flexible packaging demand. Within North America, the United States accounts for 88% of the flexible packaging market with 7% and 5% in Canada and Mexico, respectively. PCI Films expects flexible packaging growth to be approximately 4% per year for the period as technology evolves and flexible packaging continues to become a more widely used alternative to rigid packaging options.

Featured Sector Transactions March 2014 – Transcontinental, Inc. (TSX:TCL.A), a Montreal, Canada-based manufacturer of marketing products and services announced it reached an agreement to acquire the assets of Capri Packaging for approximately $133 million, or 1.9x revenue. Capri, a Clinton, MO-based subsidiary of dairy company Schreiber Foods, manufactures printed flexible packaging and has sales of approximately $72 million. The acquisition represents an opportunity for Transcontinental to diversify its capabilities and service offerings and provides the company with new technology. As part of the transaction, Schreiber Foods has agreed to a 10 year supplier agreement with Capri, which will continue providing the company with flexible packaging. January 2014 – The InterFlex Group, Inc., a portfolio company of private equity group Nicolet Capital Partners, has acquired Star Packaging Corporation from private equity group Azalea Capital for an undisclosed amount. Based in Atlanta, GA, Star Packaging manufactures flexible packaging products for a variety of industries including food & beverage, pet food, lawn & garden, pharmaceutical, and other markets. The InterFlex Group is a leader in flexible packaging with operations in the United States and the United Kingdom. The acquisition is expected to provide InterFlex’s North American operations additional scale and a wider range of packaging solutions and resources. The combined company has estimated sales of $200 million.

Private Acquirer40%

Public Acquirer28%

PE to PE4%

Private Equity (PE)28% Flexible

Private Acquirer27%

Public Acquirer 37%

PE to PE9%

Private Equity (PE)27%

# % PackagingRigidFlexibleBottlingCaps & Closures

Total

6862

22

44%44%8%4%100%

111121

25

27%36%27%9%100%

# % PackagingQ1 YTD '13 Q1 YTD '14

Q1 2013 Q1 2014

Buyer Type

Packaging Transaction Detail

Sources: P&M Corporate Finance, Plastics News, Company Reports, PCI Films

plastics.pmcf.com


4

Global Injection Molding M&A

Trends in M&A:

• Transactions involving injection molders increased by 50% or nine deals versus Q1 2013 driven largely by increased activity among suppliers serving automotive, consumer, and electronics end markets

• The transaction mix between strategic and financial buyers remained flat overall as private equity groups accounted for approxi-mately 33% of Q1 activity in both 2013 and 2014 while mix among public and private buyers shifted as public acquirers were more active in injection molding deals

• Foreign transactions experienced the strongest year-over-year growth, increasing by five deals in Q1 2014 while investments in U.S. injection molders increased by four deals


Industry News:

• March 2014 – According to new data collected by accounting and consulting firm Plante Moran, the gap in injection press cost rates between the United States and China is narrowing, setting the stage for favorable conditions for continued reshoring to the United States and Mexico. During a presentation at the Plastics News Executive Form, Plante Moran’s Ted Morgan reported on the findings of the firm’s most recent 2013 North American Plastics Industry Survey, which points to rising energy costs and wages in China as one of the primary reasons for reducing the cost difference. Further, the increased use of automation in North America is creating more a competitive cost structure by reducing the impact of higher labor costs in the United States.

• January 2014 – Malmo, Sweden-based Rosti AB announced plans to invest 60 million euros over the next two years as part of a goal to reach 600 million euros in sales by 2017. The company will seek acquisition opportunities in addition to investing in its current facilities, including adding 20 injection presses, an extrusion line, and a new painting plant at the Pickering, England location as well as seeking potential acquisitions. Rosti officials noted that reaching the 600 million euro goal will require organic growth as well as growth via acquisitions, and the company is currently considering opportunities in the U.S., Mexico, and Eastern and Western Europe.

Featured Sector Transactions March 2014 – Berry Plastics Group, Inc. (NYSE:BERY) announced an agreement to acquire the healthcare containers and clo-sures division from Rexam plc (LSE:REX) for $135 million, or a multiple of 7.1x EBITDA based on estimates. As part of the trans-action, Berry will receive eight manufacturing facilities including five in the United States, and one each in Mexico, France, and India. The containers and closures business, which had reported sales of $262 million in 2013, is one component of Rexam’s healthcare business along with the prescription retail packaging and devices businesses, which were sold to Montagu private equity in a related transaction that was announced in February. Berry believes the acquisition will offer the company meaning-ful synergy opportunities as it is folded into Berry’s existing operations.February 2014 – Montagu Private Equity, a London-based investment firm, announced it has acquired the Pharmaceutical Devices and Prescription Retail Packaging operations from Rexam plc’s (LSE:REX) Healthcare Division for approximately $805 million. The sale, which accounts for two thirds of Rexam’s Healthcare Division, does not include the healthcare closures and containers operations. Rexam has been in discussions to sell its Healthcare operations for the past year as the company aims to focus on its cans business. Montagu Private Equity has experience dealing with Rexam and in operating medical and health-care companies, having previously owned Risdon Pharma, which it sold to Rexam in 2003.

2012

Strategic Financial

67

39

106

58

52

110

18

927

126

18

70

36

106

010203040506070

90

110

80

100

20112010 Q1 YTD‘13

Q1 YTD‘14

Num

ber

of D

eals

2013

57

29

86Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

2

3

6

-

3

7

1

5

27

3

5

2

1

4

-

-

3

18

Q1 YTD ‘13 Q1 YTD ‘14

Q1 2013 Q1 2014Buyer Type

Flexible

Public Acquirer17%

Private Acquirer50%

Private Equity (PE)33% Flexible

Public Acquirer37%

Private Acquirer30%


U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

6

2

1

9

18

1

8

2

3

14

27

-

Q1 YTD ‘13 Q1 YTD ‘14

Sector Deal Statistics

Sources: P&M Corporate Finance, Plastics News, Company Reports, Applied Market Information, SPI


PMCF

5

Global Film M&A

Trends in M&A:

• Plastic film M&A remained flat during Q1 2014 compared to Q1 2013, recording 13 transactions in each period while transaction mix shifted slightly between end markets

• Strategic buyers continued to account for the majority of film transactions in Q1 2014, with 10 deals compared to three acquisi-tions by private equity groups

• Cross-border transactions declined by a single deal while investments in U.S. film manufacturers remained flat at six transactions during Q1 in both 2013 and 2014


Industry News:

• February 2014 – Dallas, TX-based market research firm MarketsandMarkets released a new report studying the projected global demand for plastic film and sheet through 2018. The report reviews plastic film manufactured from a variety of resins including LDPE, LLDPE, HDPE, CPP, BOPP, PVC, and other materials. Global consumption of plastic film and sheet was estimated at 59.9 million metric tons in 2013 and is expected to grow at a CAGR of 3.4% through 2018 when consumption will reach 70.9 million metrics tons. A significant driver for plastic film is increasing demand for packaged food in growing economies as well as a grow-ing number of plastic film and sheet products that have been commercialized for use in pharmaceutical and medical products, according to the report. The Asia-Pacific market will lead growth in the segment, particularly in India and China, while North America and Europe are considered to be in mature end market stages.

• January 2014 – Treofan Group, a portfolio company of Management & Capitali SpA, Goldman Sachs, and EBF Associates based in Raunheim, Germany that manufactures biaxially-oriented polypropylene films, announced plans to build a production plant in Germany to support its five-layer film operations. The plant, which is expected to open in mid-2015, will produce approxi-mately 1 billion square meters of film per year for premium packaging and label applications. The plant will be constructed at Treofan’s current Neunkirchen facility in Germany and is projected to cost nearly $41 million, with production lines specially designed by Andritz Group. Treofan believes the new plant will drive efficiency via the close proximity of the company’s produc-tion and development operations.

Featured Sector Transactions

March 2014 – Lyndhurst, NJ-based Sigma Plastics Group announced it is acquiring the flexible packaging and printing assets of Excelsior Packaging Group for an undisclosed amount. The transaction, which includes printing and converting equipment from Excelsior’s Yonkers, NY and Rosman, NC plants, will provide Sigma with some of the widest and fastest printing presses in the world. Sigma will continue to operate the Rosman location under a new entity called New Excelsior, Inc., while the printing, converting, and extrusion equipment from the Yonkers location will be relocated to two of Sigma’s facilities in California and New York. Sigma is one of North America’s largest privately owned flexible packaging companies, ranking second on Plastics News’ latest film and sheet rankings with sales of $2.45 billion.March 2014 – Commonwealth Laminating & Coating, Inc., a Martinsville, VA-based manufacturer of film for windows, has been ac-quired by Eastman Chemical Co. (NYSE:EMN) from private equity groups Transportation Resource Partners and Fenway Partners for an undisclosed amount. The transaction, which identifies the SunTek film brand as an attractive technology, is Eastman’s second film-related acquisition since 2012 and includes Commonwealth’s plant and headquarters in Virginia as well as nine sales distri-bution centers. Following the transaction, Commonwealth will operate as a part of Eastman’s Advanced Materials unit. Kingsport, TN-based Eastman has sales of approximately $9.4 billion.

Strategic Financial

48

27

75

112

13

103

13

45

23

68

51

27

78

01020304050607080

2012 2013 Q1 YTD‘13

Q1 YTD‘14

2010 2011

Num

ber

of D

eals

41

19

60 Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

3

5

3

-

1

-

-

1

13

5

6

1

-

1

-

-

-

13

Q1 YTD ‘13 Q1 YTD ‘14


Flexible Public Acquirer 39%

Private Acquirer 46%

Private Equity(PE)15%

Flexible Public Acquirer46%

Private Acquirer31%


PE to PE8% U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

4

1

2

6

13

-

4

-

2

7

13

-

Q1 YTD ‘13 Q1 YTD ‘14


Sources: P&M Corporate Finance, Plastics News, Company Reports, MarketsandMarkets

plastics.pmcf.com


6

Global Resin and Color & Compounding M&A

Trends in M&A:

• Transaction volume among resin suppliers and color & compounders increased by 7 deals, or 58%, year-over-year through the first quarter of 2014 vs the first quarter of 2013

• Transaction volume increased for both strategic and financial buyers while strategic buyers posted the largest growth, increasing by 6 deals in Q1 2014 compared to levels in Q1 2013

• M&A increased among both foreign and domestic buyers while transactions involving a foreign target experienced the most sig-nificant growth versus Q1 2013

Transactions by Buyer Type Sector Detail Q1 2013

Industry News:

• March 2014 – According to “Global Markets for Plastic Additives,” a new report release by Wellesley, MA-based market research firm BCC Research, the global additives market was estimated to be $43.4 billion in 2013. BCC projects the market will reach $47.7 billion by 2015, and it will continue to grow at a CAGR of approximately 4.8% through 2020 reaching $60.3 billion. Despite the projected growth in the market, environmental and regulatory actions related to the effects of certain additives could pose a potential threat to specific product types, but these factors could also provide opportunities for other additives. In particular, BCC notes additives that make plastics safer, cleaner, tougher, and more colorful will continue to be important factors in the success of polymers.

• March 2014 – Berwyn, PA-based materials supplier Styron, LLC announced plans for an initial public offering via a filing with the Securities and Exchange Commission (SEC) on March 14th. This is the second time Styron has filed for an IPO, having first filed in June 2011 before later withdrawing that filing in June 2013. Styron was formed by private equity firm Bain Capital in 2011 after acquiring the styrenics businesses of Dow Chemical Co. for $1.6 billion. According to the IPO filing, Styron will operate under the name Trinseo SA and the company hopes to raise as much as $200 million to be used to pay down debt, for working capital, and general corporate uses. Styron has approximately 2,100 employees worldwide with sales of just over $5.3 billion in 2013.

Featured Sector Transactions

February 2014 – Greenwich, CT-based private equity group Capital Partners, Inc. announced its acquisition of Breen Color Concentrates from previous private equity owner, Spell Capital Partners, for an undisclosed amount. Headquartered in Lam-bertville, NJ, Breen supplies colorant and additive concentrates to a variety of extrusion, blow molding, injection molding, and compounding applications with sales estimated to reach $35 million in 2014. The new private equity owner plans to assist Breen in identifying potential acquisition targets to expand its geographic footprint while continuing to grow organically.January 2014 – Privately owned Teknor Apex Company announced it has acquired PVC resin compounder Viking Polymers, LLC for an undisclosed amount. Based in Jamestown, NC Viking Polymers makes custom PVC compounds with a focus on chlori-nated PVC and acrylic-based materials for applications in rigid PVC for construction and other markets. Viking’s Jamestown headquarters has a capacity of 50 million pounds and will serve as a natural extension of the Teknor Apex product portfolio for weatherable compounds and rigid PVC capabilities according to the company. Prior to the acquisition Teknor Apex ranked in Plastics News’ top 30 compound and concentrate makers with estimated annual sales of $600 million.

Strategic Financial

42

14

56

84

12

14

51944

18

62

0

10

20

30

40

60

80

50

70

2012

52

16

68

2013 Q1 YTD‘13

Q1 YTD‘14

2010 2011

58

71

13

Num

ber

of D

eals

Flexible Color &

Compounding42%

Resin Supplier58%

Flexible Color &

Compounding37% Resin Supplier

63%

Sector Detail Q1 2014


Flexible Private Equity (PE)25%

PE to PE9%

Public Acquirer33%

Private Acquirer33%

Flexible Private Equity (PE)

16% Public Acquirer42%


PE to PE10%

U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

5

-

1

6

12

-

4

4

1

10

19

1

Q1 TYD ‘13 Q1 TYD ‘14


Sources: P&M Corporate Finance, Plastics News, Company Reports, BCC Research


PMCF

7

Global Sheet and Thermoforming M&A

Trends in M&A:

• Deals involving sheet and thermoforming companies remained flat at 7 transactions during the first quarter of 2014 vs first quarter 2013 as M&A activity remained healthy among both strategic and financial buyers

• Transaction mix shifted slightly in favor of financial buyers in Q1 2014, increasing to account for 43% of sheet and thermoform-ing deals versus 29% of deals in Q1 2013

• In line with overall sheet and thermoforming M&A activity, foreign and domestic transactions remained flat at 5 and 2 deals, respectively, during the first quarter 2014 vs first quarter 2013

Transactions by Buyer Type

Industry News:• February 2014 – Avon Lake, OH-based PolyOne Corporation (NYSE:POL) announced plans to cease production of its Royalex

branded sheet this year as the company closes its Warsaw, IN plant , the sole supplier of the sheet material, along with five other former plants that were part of its acquisition of Spartech Corp. last year. Royalex sheet is a preferred material used for the manu-facturing of thermoformed hulls for canoes and other watercraft applications due to the strength and durability of the material. The move has left many manufacturers of canoes and recreational equipment searching for new materials as many of these prod-ucts were sole-sourced with the Royalex product.

• February 2014 – Octal Petrochemicals FCZ, a manufacturer of PET sheet and resin based in Muscat, Oman, announced plans to create a manufacturing facility in West Chester, Ohio to make PET sheet from thermoforming waste. The new facility will cost $18 million to start and it will operate two extrusion lines when it opens, with Octal investing another $10 million within the first year for additional lines. The location was strategically selected near an intermodal facility to facilitate shipment of PET materials from Oman if necessary; however, Octal has already identified enough PET flake to supply over 90% of the facility’s capacity. This investment is part of a long-term strategy that will allow Octal to close the loop on manufacturing waste from its thermoforming customers while creating new food-grade sheet in the United States. Octal expects to identify additional opportunities for similar facilities in the Western United States and Europe.

Featured Sector Transactions March 2014 – Boltaron Performance Products, a Newcomerstown, OH-based manufacturer of rigid PVC film and sheet, an-nounced it has reached an agreement to be acquired by Simona AG (DB:SIM) for an undisclosed amount. Simona is based in Kim, Germany with North American operations headquartered in Hazelton, PA where it manufactures polyolefin sheet and PVC sheet and solid rod. The acquisition of Boltaron, which Simona has pursued for several years, represents an attractive oppor-tunity for Simona to continue its aggressive expansion. Boltaron also offers a unique manufacturing operation that includes extrusion, calendering, and press lamination all in a single location. Boltaron manufactures monolayer and multilayer film and sheet for aerospace, rail, mass transit, construction, and industrial sectors and it has estimated sales of $30 million.January 2014 – Munich, Germany-based Dubag Plastics Holding GmbH acquired Vita Thermoplastic Sheet Limited from British Vita Group for an undisclosed amount. Based in Staines, United Kingdom, Vita Thermoplastic Sheet manufactures extruded sheet, rolls, and film products including thermoplastic sheet, monolayer and co-extruded sheet, and polyolefine monofilaments. The company has approximately $200 million in annual sales and serves a variety of markets including transportation, con-struction, industrial, and packaging applications. The transaction includes locations in Austria, Denmark, France, Germany, Italy, and the United Kingdom.

Strategic Financial

0

5

10

15

20

25

30

40

35

21

11

32

2012 Q1 YTD‘13

4

7

Q1 YTD‘14

20

12

32

2010

13

12

25

2011

Num

ber

of D

eals

35

72

2013

22

16

38

Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

2

3

-

1

-

-

1

-

7

1

3

1

-

-

-

2

-

7

Q1 YTD ‘13 Q1 YTD ‘14

Transactions by End Market


Flexible

Public Acquirer29%

Private Acquirer50%


Private Equity (PE) 14%

PE to PE14%


Private Acquirer14%


U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

1

1

-

5

7

-

2

-

1

4

7

-

Q1 YTD ‘13 Q1 YTD ‘14


Sources: P&M Corporate Finance, Plastics News, Company Reports

plastics.pmcf.com


8

Global Blow Molding M&A

Trends in M&A:• Global M&A activity among blow molders posted an increase in Q1 2014 versus levels experienced in Q1 2013 as deal volume

increased by 3 transactions or 60% driven by food & beverage, industrial, and consumer markets• The deal count between strategic and financial buyers was equal in Q1 2014 with each group accounting for 4 transactions• U.S. blow molding M&A experienced the strongest growth during Q1 while foreign transactions also posted a year-over-year

increase in volume. Cross-border activity remained non-existent for the segment


Industry News:

• March 2014 – In an attempt to reduce weight as well as provide a refreshed look at some long-standing brands, MillerCoors, LLC announced it will begin shifting its packaging from glass to plastic for some of its larger 32oz and 40oz beers. The change to plastic bottles is expected to reduce the weight of each bottle by a full pound, which will ultimately provide savings on transporta-tion costs. The packaging update will be applied to each of MillerCoors’ 10 least-expensive beer brands which have increasingly experienced slowing sales. In addition to realizing the cost savings, Miller expects to maintain pricing levels and the company has already received positive feedback from retailers and distributors who like the new shatterproof plastic bottles.

• February 2014 – During a speech at The Packaging Conference in Orlando, FL in February, the research and consulting firm Bev-erage Marketing Corp. reported that bottled water continues to gain in popularity and will likely overtake carbonated soft drinks as the largest beverage category on a volume basis by 2017 or 2018. Such growth in demand for bottled water will also play a criti-cal role in driving market share gains for plastic in the beverage container market. According to Beverage Marketing Corp., the overall, broader bottled water category that includes larger containers and jugs will grow from 4% - 6% annually while single serve containers will drive growth even further. Single serve plastic water bottles, which are classified as those under 1.5 liters, already account for approximately two-thirds of the bottled water category.

Featured Sector Transactions March 2014 – The Watermill Group, a private equity firm based in Lexington, MA, announced it has acquired The Plastics Group, Inc. (TPG) from private equity groups Chicago Growth Partners and Merit Capital Partners for an undisclosed amount. The Plastics Group, which is headquartered in Willowbrook, IL with a second plant in Freemont, OH, is a manufacturer of in-dustrial blow molded products for a variety of consumer and other applications. Watermill plans to invest in TPG to bolster its design and engineering services while also exploring opportunities to expand geographically. The Plastics Group is ranked 29th on Plastics News’ recent rankings of North American blow molders with sales of $90 million.February 2014 – Plymouth, MI-based Plastipak Packaging, Inc. announced it has reached an agreement to acquire the U.S. assets of Constar International Holdings, LLC for $102.5 million after a bidding war following the company’s December bank-ruptcy filing. Constar, based in Trevose, PA, filed for Chapter 11 bankruptcy protection from creditors in December 2013 and received a stalking horse bid from Amcor, Ltd., an Australian packaging company with a North American headquarters based in Ann Arbor, MI. Amcor is North America’s largest blow molder according to the most recent Plastics News data. Plastipak, which ranked third among North American blow molders prior to the transaction, has sales of $1.65 billion across 13 plants. The Constar U.S. assets include six plants and approximately $190 million in annual sales.


Strategic Financial

0

5

10

15

20

25

30

10

8

18

2012

44

8

Q1 YTD‘14

235

Q1 YTD‘13

15

15

30

2013

11

11

22

2010

17

10

27

2011

Num

ber

of D

eals

35

Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

2

2

-

-

1

-

-

-

5

3

3

2

-

-

-

-

-

8

Q1 YTD ‘13 Q1 YTD ‘14

2013 2014

Buyer Type



PE to PE20%

Flexible

Public Acquirer25%


PE to PE25%

Private Equity (PE) 25%

U.S.-to-U.S.

U.S.-to-Foreign

Foreign-to-U.S.

Foreign

Total

Distressed

1

-

-

4

5

-

3

-

-

5

8

2

Q1 YTD ‘13 Q1 YTD ‘14


Sources: P&M Corporate Finance, Plastics News, Company Reports, Beverage Marketing Corp.


PMCF

9

Additional Global Specialty Sector Activity

Trends in M&A:• Q1 2014 M&A activity involving specialty plastic process types including rotational molding, foam, pipe & tube, profile extrusion,

and composites experienced heightened levels of deal volume, increasing by six transactions versus the prior period• Strategic buyers accounted for the largest year-over-year increase within the segment, rising by 5 deals to account for nearly 78%

of all specialty transactions in the first quarter of 2014• Specialty deal volume increased or remained flat in every end market during Q1 2014 versus the same period in 2013


FEATURED SECTOR TRANSACTIONSFoamMarch 2014 – Sleep Innovations, Inc., a portfolio company of Boca Raton, FL-based private equity firm Sun Capital Partners, announced it has reached an agreement to acquire the assets of Flexible Foam Products, Inc. for an undisclosed amount. Headquartered in Spencerville, OH, Flexible Foam manufactures polyurethane foam products for the flooring, bedding, fur-niture, packaging, retail, and automotive industries. The acquisition is expected to complement Sleep Innovation’s strength in both retail and OEM markets according to Sun Capital officials. Sleep Innovations manufactures standard and specialty polyurethane foam for bedding, furniture, auto, packaging, and consumer markets and is headquartered in West Long Branch, NJ.

ExtrusionFebruary 2014 – KP Building Products, a subsidiary of Montreal,. Canada-based Kayan Ltd. announced its acquisition of the assets of Farley Group for an undisclosed amount. Farley Group is a manufacturer of PVC and aluminum-hybid windows and patio doors and is based in Alexandria, Canada. This will be the second acquisition in less than two years for KP’s parent company, which acquired multiple facilities and operations from Uniboard, Inc. in late 2012. KP Building Products manufactures a variety of building products and materials and is based in Holly Springs, MS with approximately $205 mil-lion in estimated sales. Farley adds to Kayan’s current group of companies which includes 1,800 employees and 16 manu-facturing facilities in North America.January 2014 – Boulder, CO-based private equity firm Grey Mountain Partners has acquired Dimex, LLC from private eq-uity group Brookside Equity Partners for an undisclosed amount. Dimex operates from a 220,000 square foot manufactur-ing plant in Marietta, GA where it extrudes and finishes profiles from polyethylene and rigid and flexible PVC for primarily landscape, industrial flooring, masonry, and office equipment applications. Grey Mountain believes Dimex is an attractive investment opportunity due in part to the company’s leadership position across several end markets in profile extrusions.

Rotational MoldingMarch 2014 – Playworld Systems, Inc., a manufacturer of playground equipment based in Lewisburg, PA, announced it has acquired the New Berlin Plastics rotational molding facility from Akro-Plastics. New Berlin Plastics was founded approxi-mately 20 years ago to manufacture sliding boards and other playground related equipment primarily for Playworld Sys-tems, which accounts for nearly all of the company’s rotomolding sales. The transaction includes the factory and employees of the New Berlin, PA facility. Playworld will use the acquisition as a means to vertically integrate by bringing their rotomold-ing operations in-house.February 2014 – The assets of El Monte Plastics, Inc. were acquired by South Bend, IN-based Elkhart Plastics, Inc. for an undisclosed amount. The transaction, which includes two rotomolding facilities located a mile apart in Ohio City, OH, will grant Elkhart additional capacity and expand its customer base. El Monte Plastics has seven rotomolding machines across a combined 70,000 square feet of manufacturing space and the company serves primarily recreational vehicle markets. Both El Monte facilities will continue to remain open and be operated by Elkhart Plastics.


Strategic Financial

0

10

20

30

40

50

60

70

90

80

28

32

60

2012

414

18

Q1 YTD‘14

39

12

Q1 YTD‘13

53

27

80

2013

30

24

54

2010

57

29

86

2011

Num

ber

of D

eals

Food and Beverage

Industrial

Consumer

Construction

Medical

Automotive

Transportation

Electronics

Total

-

4

2

5

1

-

-

-

12

1

6

4

5

1

-

1

-

18

Q1 YTD ‘13 Q1 YTD ‘14

Source: : P&M Corporate Finance, Plastics News, Company Reports

plastics.pmcf.com


10

PMCF Plastics & Packaging Index S&P 500 Index

Note: Chart highlights relative stock price return

Mar- 13Mar- 12 Jun - 12 Sep - 12 Dec-12 Jun - 13 Sep - 13 Dec-13 Mar-1470%

80%

90%

100%

110%

120%

130%

140%

150%

160%

170%

PMCF Plastics & Packaging Index (Publicly Traded Companies)

PMCF Plastics & Packaging Index Valuation

• The PMCF Plastics & Packaging Index of publicly traded companies performed slightly better than the S&P 500 Index during the first quarter of 2014 as both indices remained fairly flat, increasing by 1.5% and 1.3%, respectively

• Publicly traded plastics companies continued to trade at heightened levels compared to previous two years despite the average EV/EBITDA valuations declining slightly from 9.5x in Q4 2013 to 9.4x in Q1 2014 while multiples increased by a full turn year-over-year

Q1 ‘13 Q2 ‘13 Q3 ‘13 Q4 ‘13 Q1 ‘14Revenue Multiple

AverageMedian

EBITDA MultipleAverageMedian

0.8x0.8x

6.8x7.1x

0.8x0.8x

7.0x7.2x

0.8x0.8x

7.0x7.2x

0.9x0.8x

7.4x7.3x

1.0x1.0x

8.4x8.2x

1.2x1.1x

9.3x8.8x

1.1x1.1x

9.1x8.7x

Q1 ‘12

1.2x1.1x

9.5x8.8x

Q2 ‘12

1.2x1.1x

9.4x8.8x

Q3 ‘12 Q4 ‘12

U.S. Private Equity Deal Activity

13,012

11,531 10,342

14,315

16,126

18,133 16,542

3,742 4,336

No. of Deals Disclosed Deal Value

0

Dea

l Val

ue ($

in B

illio

ns)

$0$50$100$150$200$250$300$350$400$450$500

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000 20,000

2007 2008 2009 2010 2011 2012 2013 Q1 ‘13 Q1 ‘14

Deal Volume Capital Invested

Num

ber

of D

eals

0

Dea

l Val

ue ($

in B

illio

ns)

2007 2008 2009 2010 2011 2012 2013 Q1 ‘14Q1 ‘13

3,175

2,382

1,559

2,177 2,359 2,459

2,124

493 589

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

500

1,000

1,500

2,000

2,500

3,000

3,500

• Middle market M&A activity across all industries increased during the first quarter of 2014, posting growth of nearly 16% in total deal volume versus the same period in 2013

• The first quarter also experienced a significant increase in transactions among private equity groups, which posted increased volume of approximately 19% year-over-year

U.S. M&A Activity — Deals < $500M

U.S. Middle Market Transaction Summary (All Industries)

Sources: Capital IQ, Pitchbook, and PMCF Estimates

Note: Multiples based on most recent data available as of printingSource: Capital IQ

*Includes all disclosed transaction with at least one U.S. party

plastics.pmcf.com

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P&M Corporate Finance, LLC will seek to provide investment banking and/or other services to one or more of the companies mentioned in this market overview.

P&M Corporate Finance, LLC, and/or the analysts who prepared this market update, may own securities of one or more of the companies mentioned in this market overview.

The information provided in this market overview was obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not to be construed as legal, accounting, financial, or investment advice. Information, opinions, and estimates reflect P&M Corporate Finance, LLC’s judgment as of the date of publication and are subject to change without notice. P&M Corporate Finance, LLC undertakes no obligation to notify any recipient of this market overview of any such change.

The charts and graphs used in this market overview have been compiled by P&M Corporate Finance, LLC solely for illustrative purposes. All charts are as of the date of issuance of this market overview, unless otherwise noted.

The PMCF Plastics & Packing Index may not be inclusive of all companies in the plastics and packaging industry and is not a composite index of the Plastic industry sector returns. Index and sector returns are past performance which is not an indicator of future results.

This market overview is not directed to, or intended for distribution to, any person in any jurisdiction where such distribution would be contrary to law or regulation, or which would subject P&M Corporate Finance, LLC to licensing or registration requirements in such jurisdiction.

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