ECMA Congress 2019

There is a rise in the acquisition of plastic packaging firms despite the ‘war against plastic’

By Jenny Eagle contact

- Last updated on GMT

Nick Mockett at the ECMA Congress 2019. Photo: ECMA
Nick Mockett at the ECMA Congress 2019. Photo: ECMA

Related tags: Plastic, Packaging, cartons, ECMA Congress

‘There is a trend for plastic packaging acquisitions despite all the bad rap for plastic, and that’s despite companies such as DS Smith turning towards Amazon,’ claims Nick Mockett, head of packaging M&A, Moorgate Capital.

Speaking at the European Carton Manufacturers Association (ECMA) annual congress in Malta last month (September 19,20) Mockett said the folding carton industry is fragmentated compared with other industries before turning to what drives deals in the packaging industry. 

Berry - RPC transaction

ECMA D3 Closing Session 200919 091_Original

According to EY assurance, tax, transaction and advisory services, there was a flurry of packaging deal activity with 49 deals in Q1 2019 compared to 42 in Q1 2018. 

It claims the average disclosed deal was $1,013.9m, a steep increase from Q1 2018 ($218.5m) with the Berry – RPC transaction. 

Also, the rigid packaging substrate market accounts for more than 43% of announced transactions, almost double 2018’s yearly percentage (23%). 

During the first quarter of 2019, US-based Berry Global Group, agreed to acquire UK-based RPC Group Plc for approximately $5,806.8m. RPC operates as a plastic product design and engineering company worldwide. The acquisition will allow Berry to take advantage of the highly fragmented global market for plastic packaging, particularly in Europe. 

Also, Canada-based IPL Plastics agreed to acquire Belgium based Loomans Group for approximately $85.5m. Loomans operates a single site tooling and plastics manufacturing business, with significant in-mold labelling expertise. 

We all know there has been a huge media campaign against plastic packaging but the multiples of public companies EBITDA has held up surprisingly well and the data shows the number of acquisitions increased between 2017-2018​,” said Mockett. 

Plastic remains the biggest sector, with paper and board the second biggest sector accounting for 36% of all M&A activity, followed by glass and metal which is smaller, due to its mature consolidated industries​.” 

This year in the fibre-based packaging sector the deal activity has been particularly high. For example, a client private equity fund recently acquired a business for over €300m and there are other live transactions where Moorgate Capital is advising the vendors or acquirors.

Mockett added, since 2009 the volume of paper and board merger and acquisitions has steadily increased, which can be said for all aspects of the packaging industry. 

Nampak

He said some interesting deals this year include Essentra acquiring Nekicesa Packaging, AR Packaging Group entering into a definitive agreement with a subsidiary of Nampak Limited, for Nampak Cartons Nigeria, and the online home shopping trend, which is driving growth of companies such as DS Smith through Amazon. 

Essentra announced it had acquired 100% of the share capital of Nekicesa Packaging from GED Iberian B and EBN Vaccaria for an undisclosed cash consideration last month. 

With two facilities in Madrid, Nekicesa is one of the leading converters of folding cartons supplying the pharmaceutical end-market in Spain. 

AR Packaging Group AB entered into a definitive agreement with a subsidiary of Nampak Limited for the acquisition of all outstanding shares in Nampak Cartons Nigeria Limited, a producer of folding carton products for the tobacco, food and consumer goods segments in April this year. 

Nampak Cartons Nigeria is one of the leading carton packaging companies in Nigeria with a production facility in Ibadan, Oyo State. 

With the acquisition of Nampak Cartons Nigeria, we have taken an important first step towards establishing a footprint in the African market,​” said Harald Schulz, president/CEO, AR Packaging, at the time.

Acquisitions: 

  • Oct 18: MM-Group acquires Austrian Tann-Group 
  • Nov 18: Dutch Van de Velde Packaging Group acquires Vekopak 
  • Dec 19: AR Packaging acquired Istragafica/Croatia 
  • Apr 19: AR Packaging acquired Nampak Cartons Nigeria 
  • Apr 19: Höhn acquired by Ludo Fact after insolvency 
  • Aug 19: Schur takes over Danish Emballagesgruppen 

Closures: 

  • Oct Dec 18: RLC closes a factory in Köniz, Switzerland
  • Jan 19: Roba Packaging Alpirsbach (Germany) stopped production and sold its assets 
  • Feb 19: Freund closed a factory in Georgsmarienhütte (Germany) due to insolvency 
  • May 19: Karl Knauer (Germany) closes the former Hepack factory after insolvency Model announced to close Swiss factory in Au in 2020 
  • March 19: Owner of STI-Group announced to sell the company

We are very pleased to have found such a competent partner for our global growth ambitions, and we will now be able to serve our multinational customer base on three continents​. 

We are convinced we will be able to deploy growth opportunities in Nigeria and more broadly in Africa​.” 

DS Smith

DS Smith announced in March it was selling its plastics division to private equity firm Olympus Partners, to focus on fiber and corrugated products. 

The $585m (£445m) deal marks an end to the company’s foray into plastics and allows the company to focus on recyclable packaging materials and corrugated products. DS Smith supplies packaging products to companies including Amazon.com Inc, British fashion chain Next Plc and brands such as Aldi, Tesco Plc, Primark, Auchan and IKEA. 

Let’s not forget about the micro and macro economic trends at the moment, the growing population, the ageing population, those things are driving the need for pharmaceutical products. A growth in protein, vegan diets, these are trends that are going to drive packaging​,” added Mockett. 

On the micro economic trends, home shopping is a stand out. It’s really driven a lot of the growth at companies like DS Smith. But at some point some of that growth will start to reverse back out. For example, with Amazon. Instead of selling a pencil in an oversizedbox, they will start making boxes fit-for-purpose at exactly the right size​. 

The other challenge with internet retailing is that box producers are struggling to get second hand material. Whereas the European corrugated market is dominated by second hand material in the US we see more virgin-fiber based packaging. So we may see more of a trend in Europe having to use more virgin material, because once corrugated boxes have been in the consumer household waste stream they may be contaminated and stay in that waste stream, rather than the business to business waste stream. Box producers are therefore struggling to get secondhand material for corrugated packaging​. 

Mockett added, the anti-plastic sentiment we’ve heard about recently has two extremes; for example, in the UK Iceland announced it was going to replace all its plastic packaging by 2023 and it got a huge amount of PR from it but they probably are not doing quite as well as they hoped and then there’s Burberry which moved to recycled packaging. So, the momentum is there in budget and luxury retail. 

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