Flexible packaging continues to be a happy hunting ground for private equity in North America. The attraction is that flexible packaging is a broadly non-cyclical and growing industry recognised as generating steady returns. In a very fragmented industry, private equity has had the financial resources to acquire businesses, especially in North America and Europe, and consolidate their holdings to create larger enterprises, increasingly with the aspiration to operate on a global scale.
The most recent major example is Wellspring Capital’s acquisition of Ampac Holdings LLC and its simultaneous merger with existing portfolio investment Prolamina Corporation to form a market leading new flexible packaging group with combined proforma sales around $700 million. Of this total, value-added flexible packaging sales are estimated at approaching US$500 million, ranking the new business as one of North America’s leading flexible packaging converters. A definitive trading name for the new group has yet to be revealed. Industry sources indicate that Wellspring has strong global ambitions for the merged business, and therefore more acquisitions are likely to follow.
Cincinnati, Ohio-based Ampac, an international converter with a leading position in the production of stand-up pouches in North America, has 1,300 employees and annual sales of around US$350 million of which film packaging sales are estimated by Standard & Poor’s Rating Services at US$154 million in the US. The company, which operates from 13 manufacturing sites in North America, Europe and Asia, supplies flexible packaging for a wide range of applications, the most important being frozen foods, pharmaceuticals and medical, pet food, dry foods and soups and sauces. The company is a leading producer of stand-up pouches in North America and Europe and also a major producer of retail shopping bags and security bags.
Prolamina Corporation was established in 2010 by packaging industry veteran Mr. Harold Bevis with the backing of Wellspring Capital. Following a series of acquisitions and new plant investments Prolamina has emerged as one of North America’s leading flexible packaging producers with annual sales of around US$300 million. The company operates from three plants: Westfield MA, Neenah WI, and Terrenoone, Quebec, Canada.
While there continues to be plenty of M&A merger and acquisition activity in the North American flexible packaging industry, largely driven by private equity, there is still a long way to go before the industry in the region might approach the levels of concentration already achieved in Europe. PCI believes that the top 20 converters in North America currently account for no more than 40% of value-added consumer flexible packaging sales compared with around 65% in Europe.