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Flexible Packaging Association
The Financing and M&A Environment for the Packaging Industry
Tim WildingCIBC World Markets Corp.
212-856-6783
2
Agenda
> Macroeconomic Environment
> Financing Markets
> M&A Market
> Summary Conclusions
Macroeconomic Environment
4
Macroeconomic Environment – Executive Summary
> The packaging industry has proved relatively recession resistant
> Eventual economic recovery will support improved unit growth particularly in industrial end markets
> One of the more significant near and medium term issues will be raw material prices
> We have seen dramatic resin price increases so far this year
• This is a reaction to record oil and gas prices – but importantly it is more than just a short term phenomenon
5
GDP Trends
-2
0
2
4
6
8
01.Q1 01.Q3 02.Q1 02.Q3 03.Q1 03.Q3-2
0
2
4
6
8
Real GDP Annualized Growth Unemployment Rate
% %
average GDP growth during unemploymentstability 1999-2000
Forecast
Source: CIBC World Markets
6
Consumer Spending> Consumer spending continued to grow in 2002 driving
economic growth
-2
0
2
4
Employment/Payrolls
RealDisposable
Income
PersonalConsumption
Canada US
y/y % chg (as of '02:Q3)
Source: CIBC World Markets
7
Borrowing Against Home Equity
0
6
12
18
MortgageRefinancing
Home EquityLoans
Total
Increase since Jan 2000$ Bn
> Personal consumption and consumer vitality have been underwritten by the real estate market
Source: Equifax, CIBC World Markets
8
Capital Spending
30
40
50
60
70
80
90
Nov-96 May-98 Nov-99 May-01 Nov-02
Orders Non-Defence Cap Goods (ex aircft)
Machinery/equip sales + bus construction
$bn
> The industrial economy is not as good looking
Source: CIBC World Markets
9
Raw Material Pricing – The Big Picture
> Raw material prices will provide a significant challenge
$0.25
$0.30
$0.35
$0.40
$0.45
$0.50
$0.55
Q1'00
Q2'00
Q3'00
Q4'00
Q1'01
Q2'01
Q3'01
Q4'01
Q1'02
Q2'02
Q3'02
Q4'02
Q1'03
Q2'03
Q3'03
Q4'03
Q1'04
Q2'04
Q3'04
Q4'04
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
$/l
bs.
Polypropylene Polyethylene, Low Density
Polyethylene, Linear Low Density (Butene) Polyethylene, Linear Low Density (Octene)
Polyethylene, High Density
We have seen a significant rise in resin prices as we
start 2003
Pricing cycle should peak in
2005
The summer of '02 saw a run up in prices due to double digit growth as
inventories were re-built
Source: CMAI
10
Capacity Utilization Rates Drive Resin Pricing
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20060
10
20
30
40
50
60
81% 83% 82% 86% 82% 75% 74% 79% 86% 91% 90%
LLDPE Production LLDPE Price %= utilizationLLDPE Capacity
Source: CMAI
Case Study - LLDPE
> Pricing is expected to peak in 2005
11
Raw Material Pricing – Current Environment
> Record oil and gas prices
> Capacity shutdown
> No significant new resin capacity on the horizon
> Several years of trough market conditions for resin suppliers
> Management under pressure
RESULT = SIGNIFICANT RESIN PRICE INCREASES
12
Raw Material Pricing – Current Environment
> 2003 has seen a series of resin price increases
> Resin producers are in no position to compromise
Price Increases (cents/lb)
+3-5+3+3+3Polypropylene
+5+6+5--Polyethylene
+5*+1¾+2¼--Ethylene
3/032/031/0312/02
*Announced by Equistar
Financing Markets
14
Financing Markets – Executive Summary
> M&A activity in the packaging sector will be largely dependent on continued access to the capital markets
> Approximately 75% of all rated U.S. packaging issues are non-investment grade
> The sector has performed exceptionally well in 2002 in both the debt and equity markets
> 2002 was a year of improving credit quality
> We have seen significant recent financing activity in the bank, bond and equity markets
> The markets are open and receptive to packaging credits and equity stories
15
S&P Commentary
> “Amid sluggish economic indicators across the world and concerns about a slowdown in consumer spending in the U.S., the packaging sector has remained rather buoyant, reflecting therelatively recession-resistant nature of food, beverage, and consumer product end markets.”
> Highlights:• In 2002, the median corporate credit rating was restored to
2000 levels of 'BB-', from 'B+' in 2001• 2002 saw fewer defaults and rating downgrades• 65% of rated U.S. companies now have stable or positive
outlooks • Pactiv Corp. and Printpack Inc. were upgraded, the first sign
of positive rating activity since 1999
Improving Credit Profile For The Packaging Industry In 2002
16
Interest Rates Are At Near Record Lows,…
0.0 %
1.0 %
2.0 %
3.0 %
4.0 %
5.0 %
6.0 %
7.0 %
8.0 %
9.0 %
2/19
/93
8/19
/93
2/19
/94
8/19
/94
2/19/9
5
8/19/9
5
2/19/9
6
8/19/9
6
2/19
/97
8/19
/97
2/19
/98
8/19
/98
2/19
/99
8/19
/99
2/19
/00
8/19
/00
2/19
/01
8/19
/01
2/19
/02
8/19
/02
2/19/0
3
Inte
rest
Rate
s
LIBOR 10 Year Treasury 30 Year Treasury
17
…However Credit Spreads Have Trended Upwards
220 225 230
253 255
300 300 305
275 275
325
293306
319
220
250 253
335
313
298
328
295
315
355
400
338
383
333335342342
333
306300
338
335
258
344
340
359
313
263
383
367
394385
350
330340
355
285
270
400
425
400
367
383388
368 370360
275278
150.0
200.0
250.0
300.0
350.0
400.0
450.0
FYE9
71Q
982Q
983Q
984Q
981Q
992Q
993Q
994Q
991Q
002Q
003Q
004Q
001Q
012Q
013Q
014Q
011Q
022Q
023Q
024Q
02
Bas
is P
oints
ove
r LI
BO
R
BB BB/B B
Source: Loan Pricing Corp.
> Historical Bank Term Loan B Pricing
18
The Leveraged Loan Market Has Changed
Leveraged Loan Investors> Over the past six years, the
traditional lending market has split into two distinct markets
> Both markets have very different lending objectives
• Pro rata lenders are generally focused on both relationship development with the borrower in order to create additional fee generating business and return on investment
• Institutional lenders are strictly focused on return on investment
Loan Market Characteristics Then and Now
Institutional Market(Term Loan B, etc.)
Mutual FundsMoney ManagersInsurance CompaniesFinance Companies
Pro Rata Market
(Revolving Credit & Term Loan A)
U.S. Money Center Banks
U.S. Regional Banks
“Old” Loan Market “New” Loan Market> Opaque (information closely held)
> No credit ratings or third-party research
> Club lending with specialized credit knowledge
> Negotiated or “relationship” pricing
> Bank plays both intermediary and investor roles
> “Buy and hold” lenders
> Documentation and distribution protocols unique toagent bank
> $20 MM minimum assignments required
> Transparent (information widely available)
> Credit ratings, independent data and research
> Numerous investors (institutional majority)
> Competitive pricing with comparative pricingand MTM information available
> Intermediary and investor roles more distinct
> Portfolio theory and secondary trading used tomanage portfolios
> Standardized instruments and establishedtrading protocols
> $1 MM or smaller assignment sizes widespread
19
Syndicated Loan Volume In The U.S.
66163 186
81 101 135194
273 320 310218
265
227
298
354 228200
301
637195
123 150
254 312
511
463
440
552
368
491
561
810
678
$137
$284$333
$241 $234
$375 $389
$665
$817
$888
$1,112
$872
$1,017
$1,196
$1,107
$969
2158 40 28
17
43
4442
11 47 58 4158
1017
25
64
12
15
25
16
823
1717
79
1742
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
($ b
illion
s)
Leveraged Debt Repayment Specialty Finance General Corporate
Source: Loan Pricing Corp.
> 2002 saw a reduction in loan volume from the previous year
20
Leveraged Loans – Current Market Conditions
> Strong demand for senior secured assets is driving a robust bank market in 2003
> Investors have good liquidity due to:
• Repayments resulting from recent High Yield issuance, and
• Fewer bank transactions during November and December
> Ten collateralized loan obligation vehicles ("CLO"s) are in the process of ramping-up, which will provide further liquidity to the loan market
> Improving secondary levels have driven more favorable pricing for primary issuers
> A number of new transactions have reduced pricing following retail syndication due to strong demand
> Several of these transactions were oversubscribed within two days of launch due to the perceived strength of the issuer
• Houghton Mifflin, Fisher Scientific, Central Parking, Casella Waste, Jack-in-the-Box
> Smaller transactions are more challenging and don’t have access to the institutional market
21
Recent Packaging Bank Loans
Company Date Rating Amount Price Type Purpose Investment Grade: Bemis Jan-03 A $215.0 L+35 Revolver Corp. Purp. Sonoco Products Jul-02 A- $450.0 L+37.5 Revolver Corp. Purp. Sealed Air Mar-01 BBB $375.0 L+125 Revolver Corp. Purp. Pactiv Jan-03 BBB $265.0 L+100 Revolver Corp. Purp.
Non- Investment Grade:
Crown Cork & Seal In Market B $550.0 $500.0
L+400 L+425
Revolver Term-B
Refinance
Silgan Container In Market BB- $10.0 L+200 Term-B Add-on Graham Packaging Jan-03 B $150.0
$695.0 L+325 L+325
Revolver Term-B
Refinance
Atlantis Plastics Dec-02 NR $35.0 $35.0 $40.0
L+375 L+375 L+425
Revolver Term-A Term-B
Refinance
Ball Corp. Dec-02 BB+ $500.0 $250.0 $350.0 $300.0
L+200 L+200 L+225 L+250
Revolver Term-A Term-B Term-C
Acquisition
ConStar Int. Nov-02 BB- $100.0 $150.0
L+300 L+450
Revolver Term-B
IPO Related
Berry Plastics Jul-02 B+ $100.0 $330.0 $50.0
L+275 L+300 L+275
Revolver Term-B Term-C
LBO
Printpack Mar-02 BB $100.0 $100.0 $200.0
L+275 L+275 L+275
Revolver Term-A Term-B
Refinance
Source: CIBC World Markets
22
U.S. High Yield Bond Market
$39
$64
$34$41
$64
$110
$140
$103
$50
$91
$68
$13
$0
$20
$40
$60
$80
$100
$120
$140
$160
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003YTD
($ b
illio
ns)
Source: CIBC World Markets
> 2003 YTD issuances are 32% ahead of the level this time last year
23
The Packaging Industry Was The Top Performing Sector In The U.S. High Yield Market In 2002
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
Tran
sportat
ion
UTILI
TIES
Cable
TECH
& TE
LECO
M
Tech
nolog
y
Wire
line
HY IN
DEX
Wire
less
Energ
y
Healt
hcare
Food
& Bev
erage
Finan
cial
Metals & Mini
ng
Div.
Manufa
cturin
g
CONS
UMER
Media
Consum
er Pro
ducts
INDU
STRIAL
Chem
icals
Busin
ess S
ervice
sBu
ilding Au
to
Gaming
, Lod
ging
Pape
r & Fo
rest
Retail
Packag
ing
Hig
h Y
ield
Bond R
eturn
s %
Source: Commscan DebtDesk
24
High Yield – 2002 Overview And Current Conditions
> Corporate mismanagement and evidence of a slower-than-expected economic recovery resulted in volatile capital markets in late-June/August
• 11 week string of outflows from High Yield mutual funds ($2.5B)
• Primary issuance in the High Yield market slowed dramatically
> November/December saw net High Yield mutual fund inflows of $4.4B
> Investors remain focused on liquidity, ~95% of the total 2002 U.S. High Yield issuance were more than $150.0M in proceeds
> Transactions for smaller companies (i.e. <$100M of EBITDA) were well received in 2002
• 68 transactions priced, with total proceeds of $10.8B
> Positive investor sentiment during Q4 2002 carried over into 2003
• High cash levels combined with a lack of offerings in the secondary market resulted in strong primary demand
• 40 transactions have priced for aggregate proceeds of $12.8 billion year-to-date
• This pace is 32% ahead of the same period in 2002
> For smaller issues there is an active and vibrant private placement market as an alternative to the High Yield bond market
25
Significant Recent Bond Issuance By The Packaging Industry
2/15/12
6/01/10
6/01/09
6/15/10
7/01/12
7/15/12
11/01/12
12/15/12
3/01/13
3/01/11
3/01/11
8/15/08
11/15/13
1/15/33
1/15/13
Maturity
Investment Grade:
4.875%$250.0A1/14/03Avery Dennison
6.000%$150.0A1/14/03Avery Dennison
6.500%$250.0A-10/30/01Sonoco Products
6.500%$250.0A8/07/01Bemis
High Yield:
10.250%$306.1B+2/11/03Crown Cork & Seal
9.375%
13.000%
9.000%
12.750%
8.375%
10.750%
11.000%
6.875%
10.875%
9.500%
Coupon
$155.0
$100.0
$200.0
$40.0
$400.0
$250.0
$175.0
$300.0
$725.0
$1,085.0
Amount
B2/06/02Kloeckner Pentaplast
B-4/05/02Pliant Corporation
B4/23/02Silgan Holdings
B-5/01/02Tekni-Plex
B6/19/02Stone Container
B-7/17/02Berry Plastics
B11/15/02Constar International
BB12/05/02Ball Corp.
B2/11/03Crown Cork & Seal
B+2/11/03Crown Cork & Seal
RatingIssue DateCompany
26
Equity Market Overview
21.3 x
16.9 x
970.4
1,570.4
7,908.3
1997
28.0 x
15.6 x
1,229.2
2,192.7
9,181.4
1998
19.6 x29.4 x24.3 x29.7 xS&P 500 P/E
12.6 x15.0 x10.3 x14.2 xPackaging Index 1
P/E
879.81,148.11,320.31,469.3S&P 500
1,335.51,950.42,470.54,069.3NASDAQ
8,341.610,021.510,786.911,497.1Dow Jones Industrials
2002200120001999(as of December 31)
1Packaging Index consists of AEP Industries, Amcor, Applied Extrusion, AptarGroup, Atlantis Plastics,Avery Dennison, Ball, Bemis, CCL, Crown Cork & Seal, Huhtamaki, Intertape Polymer, Pactiv, Pechiney,Owens-Illinois, Sealed Air, Silgan Holdings, Sonoco Products and Winpak.
> The equity market has now returned to 1997 levels
27
Packaging Equities Significantly Outperformed The S&P 500 In 2002
60
70
80
90
100
110
120
130
2/19/99 8/2/99 1/11/00 6/21/00 11/30/00 5/11/01 10/22/01 4/2/02 9/11/02 2/20/03
Index
ed P
rice
s
S&P 500 Packaging Composite
Packaging Composite consists of AEP Industries, Amcor, Applied Extrusion, AptarGroup, Atlantis Plastics,Avery Dennison, Ball, Bemis, CCL, Crown Cork & Seal, Huhtamaki, Intertape Polymer, Pactiv, Pechiney,Owens-Illinois, Sealed Air, Silgan Holdings, Sonoco Products and Winpak.
The packaging sector starts to outperform the S&P 500
28
Equity Market – 2002 Overview And Current Conditions
> In 2002, 79 IPOs priced raising $25B
> IPOs in 2002 outperformed the broader equity markets
• Average Day 1 performance +9%
• Average Offer to current performance +3%
> The IPO market in 2003 has been relatively slow with only 4 deals raising $880M to date
• 3 IPOs priced the week of February 10th raising $284M
> 384 Follow-on offerings raised $69B in 2002
• Follow-ons priced in 2002 traded down 11% from their offer price, compared to the Nasdaq Composite which was down 32% for the year
> 38 Follow-on offerings have priced 2003 YTD raising $6B
• 4 Follow-on offerings priced the week of February 17th raising $207M
> Shelf filings remain a significant percentage of total filings
> The current equity backlog consists of 19 deals
29
Recent Packaging Industry Equity Issuance
(Filed) $250.0IPOPendingGraham Packaging
$144.0IPO11/14/02Constar International
AmountType of SecurityDateCompany
Constar Case Study
> Description: Constar was a 100% carve-out IPO from Crown Cork & Seal a manufacturer of PET and HDPE plastic containers, metal and plastic closures and health and beauty care packaging
• Crown Cork & Seal did not retain any ownership in Constar
> Offering was downsized from $136.5M to $126.0M
> Filing range was $14.00 - $16.00
> Priced at $12.00 per share, a 20% discount to the filing range midpoint of $15.00
• Currently trading at $7.94, a loss of 33.8% since pricing
30
Canadian Income Funds – An Alternative IPO Market?
> Tax efficient structure for distributing cash to investors seeking stable and predictable cash flows
> Can result in premium valuations, value based on yield of pre-tax cash flow
> Market currently comprised of 93 funds• Aggregate market capitalization of ~C$43 billion
> Recently gained popularity among retail and institutional investors• Low interest rate environment• Demand for conservative, income generating investments• Improving business fundamentals: growing distributions• Increased investor vigilance regarding corporate governance
> C$6.9 billion issued in 2002 - 29 IPOs and 32 follow-on offerings as compared to C$4.4 billion issued in 2001 - 8 IPOs and 50 follow-on offerings
> Significant pipeline of new issuance> CIBC World Markets is the market leader in income fund underwriting,
trading and research and has developed a U.S. product
31
Canadian Income Fund Candidate Characteristics
> Stable historical and forecasted operating net cash flows
> Strong market position
> No major corporate events or industry changes anticipated
> Low and predictable capital expenditure requirements
> Modest growth opportunities
> Strong sponsorship
> Conclusion: Many packaging companies meet these characteristics
M&A Market
33
M&A Market – Executive Summary
Drivers Of M&A Activity In The Packaging Industry:
> Push towards further consolidation
• Economies of scale
• Product offering
• Customer focus
> Economic recovery
> Improved credit profile
> Access to capital markets
> Healthy public market valuations
> Active buyer universe, including private equity funds
34
Global M&A Market Overview
> Activity has slowed significantly from a peak in 1999
Source: SDC
$553 $660
$1,119
$1,882
$2,780
$3,767
$1,936
$1,253$1,291
$4,283
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Volu
me i
n B
illion
s
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Nu
mb
er
of
Tra
nsa
ctio
ns
Volume in Billions Number of Transactions
35
Packaging Industry Global M&A Market Overview
Source: SDCExcludes deals < $25 million.
> 2002 saw a rebound in the value of M&A transactions in the packaging industry
$2,212
$9,661 $9,889
$7,928$7,391
$4,544
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
1997 1998 1999 2000 2001 2002
Volu
me i
n M
illion
s
0
4
8
12
16
20
24
28
32
36
40
Nu
mb
er
of
Tra
nsa
ctio
ns
Volume in Millions Number of Transactions
36
Flexible Packaging M&A Transactions
> Recent transactions have been completed in the 6.0 - 7.0x EBITDA range
Trans. Val. / Year Acquirer Target Trans. Val. Revenue EBITDA EBIT
($ mil.)Pending Alcan VAW Packaging (FlexPac) $345 0.5x 6.9x NA2003 Rock-Tennessee Cartem Wilco 65 1.1 6.9 NA2002 Alcoa Ivex 790 1.2 7.9 13.0x2002 Bemis Walki Films (UPM-Kymmenee) 69 0.6 6.0 NA2001 Amcor Danisco Flexible Packaging 306 0.6 6.8 NA2001 Cinven Pentaplast Group (Klockner-Werke) 925 1.1 7.0 NA2001 SCA Tuscarora 284 1.1 6.2 10.4 2000 Mail-Well American Business Products 334 0.7 NA NA2000 Chase Equity Partners Pliant (Huntsman Packaging) 1,070 1.3 NA NA2000 Bemis Viskase 226 1.5 NA NA2000 Pechiney International JPS Packaging 44 0.5 4.3 NA2000 Sealed Air Dolphin Packaging 118 1.4 6.6 NA2000 MY Holdings Low & Bonar 120 0.7 9.4 NA1999 Candover Clondalkin 515 0.8 6.5 9.0 1999 Tenneco Amoco Plastic Container 310 1.1 7.2 NA1998 Investor Group KNP BT (Packaging) 1,700 1.2 9.7 13.7 1998 Sealed Air Cryovac Packaging (W.R. Grace) 5,000 2.7 NA NA1998 Huntsman Packaging Blessings 270 1.5 NA NA1998 Huhtamaki Sealright 226 0.9 9.8 NA
Mean 1.1x 7.2x 11.5xMedian 1.1 6.9 11.7
37
Public Market Valuations
LTM EBITDA Margin
0%
5%
10%
15%
20%
25%
PTV SEE Winpak BMS AVY ITP AETC AGH AEPI
Average: 15.1%
> Public values are highly correlated to EBITDA margin
> Transactions in the 6.0 – 7.0x EBITDA range should be accretive to earnings
> The 3 year average FV/LTM EBITDA multiple is 7.9x
FV / LTM EBITDA
0.0x
3.0x
6.0x
9.0x
12.0x
AVY Winpak AETC SEE BMS PTV ITP AEPI AGH
Average: 7.8x
38
Significant Financial Buyer Interest In The Sector
> Many other private equity firms are looking for a platform investment in the packaging industry
> Rationale:• Relatively recession resistant• Good cash generators• Industry consolidation
Pentaplast GroupCinven
Atlantis Plastics, Jet Industries, PlasseinTrivest
ClondalkinCandover
AEP IndustriesKKR
Dor Chemicals (acquired Trespaphan, OPP Films)Bain Capital
Berry PlasticsGoldman Sachs
Consolidated ContainerVestar
Packaging Corp. of America (with Pactiv)Madison Dearborn
Graham PackagingBlackstone
Tekni-PlexWeston Presidio
Berry Plastics, Pentaplast Group, Pliant, etc. JPMorgan Partners
Kranson IndustriesCode Hennessy
Portfolio Company / InvestmentPrivate Equity Fund
39
Anatomy Of A 2003 Packaging LBO
> Minimum equity contribution 30%
> Total debt / EBITDA 4.5–4.75x
• Maximum bank debt / EBITDA 2.75x
• Non-bank debt / EBITDA 1.75–2.0x
> Targeted IRR Minimum 25%
> Exit 3-5 years
> Exit alternatives: trade sale, IPO, re-capitalization or income fund
> Ideal candidate is a platform for add-on acquisitions
2003 LBOs are more conservatively structured than the halcyon years of the late 1980’s
40
Average Debt Multiples Of Highly Leveraged Loans
4.7
3.4 3.42.6 2.7
3.3 3.5 3.6 3.5 3.3 2.92.2 2.4 2.4 2.6
4.1
3.53.3
2.0
2.4 2.5 2.5 1.92.3 2.1
1.71.2
1.2
1.5 1.4 1.3 1.2
8.8
6.7
5.0 5.2 5.3 5.2
5.8 5.7
4.5
3.7 3.8 3.8
2.83.7
3.7*4.0*
5.3*5.3*
7.1*
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
1987 1988 1989 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 3Q02 4Q02
Bank Debt/EBITDA Non-Bank Debt/EBITDA
Criteria: Pre-1996: L+250 and Higher; 1996 to Date: L+225 and Higher; Media and Telecom Loans Excluded. There were too few deals in 1991 to form a meaningful sample.
* Represents rounding errorsSource: Portfolio Management Data
> Highly leveraged loans are now less leveraged!
41
Average Equity Contribution To Leveraged Buyouts
3.3% 3.5% 4.1% 3.9% 5.5% 2.7% 4.2%
7.0%9.7%
13.4%
20.7%22.0%
25.2% 26.2%23.7%
30.0%31.6%
35.7%37.8%
40.6% 40.0% 40.9% 41.0%
1.9%
22.9%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1987 1988 1989 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 3Q02 4Q02
Equity
as
a P
erce
nt
of
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l Sourc
e
Rollover Equity Contributed Equity
> Equity includes common equity and preferred stock as well as holding company debt and seller note proceeds downstreamed to the operating company as common equity; Rollover Equity prior to 1996 is not available; There were too few deals in 1991 to form a meaningful sample.
Source: Portfolio Management Data
> As mentioned, we have come a long way from the thinly capitalized structures of the late 1980’s
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M&A/LBO Case Study - Clondalkin Group
Company is currently for saleStrategic and financial buyers are interested
2003 Exit
Revenue and EBITDA have grown from €595M and €75M to €708M and €90M respectively. Clondalkin acquired EPH in April 2001. (2001 EBITDA contribution=€14M)
Since Private
September 1999: Candover & Clondalkin Group made a cash offer of €9.10 per share (€487.5M total), a premium of 30.0% to the average share price for the three months prior to announcement. This represented a multiple of approximately 6.5x EBITDATransaction was financed with approximately 23.1% equity and levered at 5.0x EBITDA. (Senior Bank=3.4x; Mezzanine=1.6x)
Going Private/LBO
Previously listed on the Dublin Stock Exchange. The stock traded from €4.8 to €10.0 over the two years prior to the LBO
Background
European manufacturer of flexible packaging and specialty packaging. ~45% of sales are from plastic/polymer based products, with paper and paperboard-based products accounting for ~35% and foils/coatings the remaining
Description
Summary Conclusions
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Summary Conclusions
> The industry has proved relatively recession resistant
> Renewed economic growth will provide a positive boost
> Raw material price increases will remain a near and medium term challenge
> The capital markets are open and receptive to packaging transactions
> M&A activity is likely to accelerate
Flexible Packaging Association
The Financing and M&A Environment for the Packaging Industry
Tim WildingCIBC World Markets Corp.
212-856-6783
FPA’s 2003 Annual Meeting