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Commentary & Analysis

End of the Line for MeadWestvaco – January 2015 M&A Activity

Paper and packaging industry giant MeadWestvaco appears to be at the end of its life as an independent entity. The company agreed to a merger with RockTenn to form a yet-to-be-named successor company. RockTenn’s expertise in kraft paper, corrugated cartons and retail displays will combine with MeadWestvaco’s strengths in paperboard and folding cartons. The result will be a powerful player in the increasingly global packaging industry, with over $15 billion in annual revenues.

By Mark R. Hahn
Published: February 11, 2015

Paper and packaging industry giant MeadWestvaco appears to be at the end of its life as an independent entity. The company agreed to a merger with RockTenn to form a yet-to-be-named successor company. RockTenn’s expertise in kraft paper, corrugated cartons and retail displays will combine with MeadWestvaco’s strengths in paperboard and folding cartons. The result will be a powerful player in the increasingly global packaging industry, with over $15 billion in annual revenues.

In apparent preparation for the deal with RockTenn, earlier in the month MeadWestvaco announced the spinoff of its chemical business into a separate public company. Only four days before the merger with RockTenn was announced, MeadWestvaco sold it European tobacco and confectionary folding carton packaging units to Sweden-based AR Packaging Group. That deal has the appearance of a fire-sale in today’s hot market for packaging-related acquisitions, selling at only 3.9 times trailing EBITDA, less than 50% of revenues.

MeadWestvaco itself was born in 2002 from the combination of Westvaco, a descendant of the West Virginia Pulp and Paper Company, and The Mead Corporation, founded in 1846 by Colonel Daniel Mead to produce book papers in Dayton, Ohio. Prior to their merger, these two companies produced some of the workhorse papers of the commercial printing industry, Sterling from Westvaco and Mead Offset Enamel from Mead (or as we used to call it, simply “EmOhEee”). IN 2005, MeadWestvaco sold off its printing papers unit to Cerberus Capital Management to form NewPage, which itself ceased to exist earlier this month with the completion of its sale to Verso.

Packaging & Labels

Multi-Color Corporation, a frequent entry on the buy-side in our deal logs, was back again with its acquisition of a relatively small ($15 million revenue) producer of premium wine and spirit labels in Daventry, UK. In an apparently prescient branding decision, the target company is named Multi Labels.

The Wendell Group in Paris, France picked up nine North American locations with its acquisition of Vienna, Austria-based Constantia Flexibles. The price paid was consistent with the higher multiples being reported for packaging companies in the flexible packaging space, reported at 9.9 times EBITDA, or 140% of trailing revenue.

Glenroy, a producer of raw and printed films for flexible packaging located in Menomonee Falls, Wisconsin, and itself a manufacturing of flexible pouches, acquired PF Flexibles in Hartford, Wisconsin, strengthening its positon in the flexible packaging segment. HP Mile, Syracuse, New York-based specialist printer of labels for regulated healthcare markets, picked up Lauraville Packaging which has expertise in printing multi-page encapsulated expanded content labels.

In corrugated packaging and display, JV Kraft Group and Schwarz Partner formed a joint-venture, New-Indy JV, as a platform to acquire Carolina Container in High Point, North Carolina. Menasha Packaging expanded its footprint into Canada by acquiring PearceWellwood, retail display provider in Brampton, Ontario.

Marketing Technology

As many newspaper publishers struggle with declining circulation and ad revenues, some are redefining what it means to be the local and regional nexus for news and marketing. A.H. Belo, known for its ownership of The Dallas Morning News and The Denton Record-Chronicle, both in Texas, has been branching out with its DMNmedia division, provider of marketing solutions, including digital, print, mobile, direct marketing, social media, research and creative services, promotions and events. A.H. Belo acquired three related companies, Distribion,Vertical Nerve and Marketing FX in a deal valued at $15.3 million. The acquired companies specialize in local marketing automation, search engine marketing, direct mail and promotional products. Based on the averages reported for the acquired companies, the price paid was 14.6 times projected EBITDA, or 153% of forward revenues.

Specialty

Ennis, another frequent entrant in our deal logs, notable for its focus on acquiring companies that print products, rather than companies that print jobs, was back at it again with its acquisition of Kay Toledo Tag, producer of tags, labels and tickets.

J.N. White Designs, printer of industrial products in Perry, New York, acquired the graphic overlay and membrane printing business of Dawar Technologies. The company’s products include screen printed labels, decals, nameplates, graphic overlays and high-tech user interface control panel assemblies.

DG3, the global printing company with long established outposts in the UK and Hong Kong, acquired Digital Publishing Solutions, a document management and automated publishing technology company with expertise in filing requirements for financial services companies.

Commercial Printing & Marketing Service Providers (aka MSP’s)

Transaction activity picked up in the commercial segment, after several relatively quiet months. However, the one major deal of the month, Quad/Graphics’ acquisition of Courier Corp. was squashed when RR Donnelly decided it would not let this one get away. RRD swooped in with an offer that Courier could not refuse. (More on that deal next month.)

Midstate Printing and Quartier Printing, both of Syracuse, New York, decided to join forces in a deal promoted as a merger. Several other commercial printers announced acquisitions, including Peczuh Printing in Price, Utah; Seaboard Graphics in Liverpool, New York; and Arrowhead Printing in Superior, Wisconsin.

After many quiet months in which it there were few or no bankruptcies in the printing and related industries, several small commercial printing companies filed in January, all seeking to liquidate in Chapter 7.

Publications & Newspapers

Adams Publishing Group continued its acquisitive bent, purchasing The Dundalk Eagle community newspaper in Maryland, adding to its APG Media of Chesapeake holdings.

SkyMall, publisher of in-flight shopping catalogs, filed for Chapter 11 bankruptcy, seeking to find a buyer and reorganize. Social media was buzzing with jokes about all the silly items offered for sale to bored airline passengers who might be tempted to buy such things as a Big Foot statue or a mini-Mount Rushmore for their garden. Once reportedly viewed by 650 million passengers each year who had nothing else to do inflight, the CEO blamed smart phones and other devices for the demise.

The remaining properties of Cygnus Business Media, publisher of B2B titles, were acquired by SouthComm. Many readers of The Target Report will recognize Cygnus as the publisher of Printing News, MyPrint Resource.com, Quick Printing and other titles in the printing and related industries.

View the complete M&A report for January 2015

Mark Hahn is a Managing Director and Founder of Graphic Arts Advisors, a boutique strategic financial advisory and consulting firm focused exclusively on the printing, packaging and related industries. He assists company owners and management, as well as their lenders, investors and shareholders in the following areas: mergers & acquisitions, sale of business, strategic and financial advisory, capital structure & funding, financial analysis, interim & turnaround C-level management and business valuations. Mark is the author of The Target Report and is regularly published and quoted in printing industry trade and management journals. Mark can be reached at 973-588-7399 or mark@graphicartsadvisors.com.

 

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