Tuesday, July 7, 2020

Donuts Lead the Way in Return to Normalcy – June 2020 M&A Activity


Buyers of packaging companies, both privately-owned and PE-backed, closed on deals in June, a clear demonstration of their confidence in the long-term economic recovery. However, confidence is not yet evident across the packaging board; a deeper look reveals a common thread among these early out-of-the-gate acquisitions. Despite the deep recession, everything that gets consumed still needs to be labeled, boxed, bagged, bottled, or pouched. As we transitioned to a nation of homebodies and online shoppers, what we are consuming is food; baked, processed, canned, dried, frozen, and all forms of packaged food. Bottled drink sales are up and consumption of in-home alcoholic beverages (and cannabis products where legal) have zoomed upward as we sit home and Zoom each other. Not surprisingly, sales of snack foods, in all forms, are especially booming.

Southern Champion Tray (SCT), a family-owned company headquartered in Chattanooga, Tennessee, acquired Honeymoon Paper Products. The acquired company manufactures corrugated circles and pads (aka “cake boards”) used in the take-out departments of bakeries and delis. SCT has announced that it plans to retain the workforce at Honeymoon and continue to operate the plant in Fairfield, Ohio. With over 650 employees, SCT produces over 500 stock products, as well as custom solutions, for customers primarily in the foodservice and bakery industries using offset litho, flexographic and digital printing technologies. The company’s products, while not glamorous, are ubiquitous and familiar; the white cake box tied with string at the local bakery, the printed tray used to serve fried chicken bits, the open-top French fry envelope, and the donut box with the glassine see-through top.

Welch Packaging is once again executing on its consistent and highly focused growth-by-acquisition strategy (see The Target Report: Catching the Wave in Corrugated Cartons, February 2020), with the acquisition of Excel Display and Packaging in Aurora, Illinois. True to Welch’s M&A history, the acquired company produces corrugated products, including food packaging. This is the third acquisition this year for Welch, and the second deal that is a carve-out of a company previously owned by pulp and paper manufacturer, the much larger Georgia-Pacific.

C-P Flexible Packaging, with private equity backing by First Atlantic Capital, acquired Genpak Flexible. The acquired company is headquartered in Aurora, Ontario, with an additional production facility in Lakeville, Minnesota. Consistent with the noted trend, Genpak’s business is primarily packaging for food, including manufacturing specialty multi-layer coffee bags, pet food pouches and bags, candy bar stick packs, and printed rollstock for others to use in their own packaging lines. And Genpak’s core business? Snack food packaging, for products from potato chip and tortilla chips to salted nuts and confectionaries.



Brook & Whittle, the Connecticut-based label printing company now backed by its second private equity sponsor, Snow Phipps Group, has acquired Label Impressions, located in Orange, California. Label Impressions utilizes Flexo presses, up to 10 colors, along with rotary screen printing, to produce labels, stand-up, zippered and gusseted pouches, as well as single-serve sachets and stick packs. Market segments served include beverages, food, specialty secure packaging for cannabis products, and lawn & garden products (another up-market as people stay home and groom their yards). Clearly confident in the market for packaging, this is the second deal for Brook & Whittle in as many months. 

June was the first relatively active month for M&A deals since the Covid-19 induced shut-down began mid-March. The renewed transactional activity is a clear indication that packaging manufacturers expect demand for packaged products to continue apace or grow, and as a consequence, the appetite for their packaging expertise and capacity will tag right along and grow also. A perfect recipe for more deals in the future.

Update: The Impact of Covid-19

In our opinion, the June deals are a clear sign of a thaw in the market; deals that were frozen when the virus broke out are now closing. In addition to the transactions noted above, which were likely in process and closed only after a restart and sufficient due diligence, other acquisitions completed in June include Baldwin Technology’s purchase of Western Quartz Products, an established producer of UV lamps which are used to cure UV-cured inks, increasingly used in offset printing production. In another deal, also likely in process before the freeze-up, Sun Chemical absorbed Sensient Imaging Technologies, a supplier of digital printing inks used in the rapidly growing application of inkjet printing technology in packaging, commercial printing, book printing, direct mail and transactional print segments.

There has not been a significant uptick in bankruptcy filings, as might have been expected. We found only three, two Ch. 7 liquidations and one Ch 11 petition for relief. A small letterpress shop in the Boston area, Goosefish Press, filed for Ch. 7, as did United Printing Media & Graphics in Gaithersburg, Maryland.

FiberCorr Mills, located in Massillon, Ohio, filed a voluntary Ch.11 petition, presumably to restructure the company’s debt and emerge with a cleaned up balance sheet. The filing by FiberCorr Mills represents a rare bankruptcy filing in the corrugated segment. Manufacturers of kraft and corrugated products have benefitted over the past several years from the increased demand for corrugated cartons and packing materials needed to ship all those online orders. Apparently, FiberCorr Mills is the exception; the company blamed its insolvency on economic forces, including China’s increased demand which drove up their cost for raw materials. We suspect that the $8.5 million purchase of a new state-of-the-art corrugator which went into live production in June 2019 also had something to do with the bankruptcy filing.

Where we did see a significant increase in distressed activity was in non-bankruptcy closures across several other industry segments. Commercial printing trade company 4over announced the permanent shut down of its printing plant in Mississauga, Ontario, after announcing temporary layoffs in March due to reduced demand in the wake of the Covid-19 outbreak. The presses and bindery equipment of Starnet Printing, a commercial printing company in Mahwah, New Jersey are scheduled to be auctioned off in early August. Catalog printer Arandell will close its Walton, Kentucky plant, ceasing operations by the end of July.

TC Transcontinental closed two newspaper plants in Québec when TC’s customer decided to permanently stop publishing the weekly papers that kept the plants busy. Weekend editions have been moved to TC Transcontinental’s newer and more efficient newspaper printing facility in Montréal. (For more on TC Transcontinental’s transformation into a packaging powerhouse, see The Target Report: Getting Flexible In Your Middle Years, April 2018).

Verso Paper announced the indefinite cessation of operations at two paper mills that produced graphic printing grades, citing the unprecedented decline in demand due to the Covid-19 pandemic. The two mills, in Duluth, Minnesota and Wisconsin Rapids, Wisconsin, will together layoff approximately 1,000 employees.

However, lest we leave the reader with a message of gloom and doom, the picture is more complex. The return of healthy M&A deals, as noted in our June deal log below, as well as the number of inquiries we are receiving here at GAA from buyers seeking to acquire printing and packaging companies, indicates that buyers are restarting their deal engines, coming back into the market, and are ready to close deals.



2020 June - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenues
($Mil )


Party #1 Address


Deal Party #2
Pre-Deal
Revenues
($Mil )


Party #2 Address
Date
Deal
Public
Deal
Value
($Mil)

Deal Structure
(Intermediary)


Notes

Press
Release
Pocket Outdoor Media No Data Boulder, CO Health & fitness publications
(Div. Active Interest Media)
No Data El Segundo, CA 6/30/20 No Data Acquisition Magazine publisher Link
Southern Champion Tray No Data Chattanooga, TN Honeymoon Paper Products No Data Fairfield, OH 6/29/20 No Data Acquisition Bakery & deli packaging Link
Turbo Images No Data Saint-Georges, QC Lettrapub No Data Sainte-Marie, QC  6/29/20 No Data Acquisition Wide format fleet graphics Link
MetroVCS No Data Dallas, TX Sunbelt Letterpress No Data Dallas, TX 6/24/20 No Data Acquisition Letterpress & finishing Link
C-P Flexible Packaging
(Port co. First Atlantic Capital)
No Data York, PA Genpak Flexible
(Port co. Jim Pattison Group)
No Data Aurora, ON 6/19/20 No Data Acquisition
(Mesirow)
Labels & flexible packaging Link
Brook & Whittle
(Port co. Snow Phipps Group)
No Data North Branford, CT Label Impressions No Data Orange, CA 6/18/20 No Data Acquisition Labels & flexible packaging Link
TC Transcontinental $2,095 Montreal, QC Enviroplast No Data Anjou, QC 6/16/20 No Data Acquisition Plastic recycling Link
Baldwin Technology
(Port co. BW Forsyth Capital)
No Data St. Louis, MO Western Quartz Products No Data Paso Robles, CA 6/9/20 No Data Acquisition UV curing lamps Link
The Sourcing Group (TSG) No Data New York, NY BrandAlliance-US No Data Charlotte, NC  6/9/20 No Data Sale in foreclosure Promotional products Link
Welch Packaging Group No Data Elkhart, IN Excel Displays & Packaging
(Div. Georgia-Pacific)
No Data Aurora, IL 6/8/20 No Data Acquisition Retail display & packaging Link
PDF Communications No Data Signal Hill, CA Bestforms No Data Camarillo, CA 6/7/20 No Data Acquisition
(Corp Dev Assoc)
Label & forms printing Link
Sun Chemical
(Div. Dainippon Ink & Chemicals)
$7,000 Parsippany, NJ Sensient Imaging Technologies No Data Morges, Switzerland 6/2/20 No Data Acquisition Digital inks Link
Shamrock Capital No Data Los Angeles, CA Adweek
(Port co. Berginger Capital)
No Data New York, NY 6/2/20 No Data Acquisition Magazine publisher Link


2020 June - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenues
($Mil )



Case #



Filing Party Address



Circuit



Region & City



Judge



Attorney for Debtor



Notes
Chapter 11 Filings:
FiberCorr Mills 6/18/20 No Data 20-61029 Massillon, OH 6th Northern OH
Canton
Russ Kendig Anthony DiGirolamo Corrugated sheets & rolls
Chapter 7 Filings:
Goosefish Press, Inc. 6/3/20 No Data 20-11254 Hull, MA 1st Massachusetts
Boston
Frank J. Bailey AnDre' D. Summers Letterpress printing
United Printing Media & Graphics, LLC 6/1/20 No Data 20-15709 Gaithersburg, MD 4th Maryland
Greenbelt
Thomas J. Catliota Sari Karson Kurland  Commercial printing


2020 June - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenues
($Mil )



Closing Address
Related Party Related Party
Address
Date Closure Public


Notes

Press
Releases
4over - Printing plant Jun-20 $11.0 Mississauga, ON 4over Glendale, CA 6/17/20 Commercial trade printing Link
TC Transcontinental - Printing plant Jun-20 No Data Québec City, QC TC Transcontinental Montreal, QC 6/17/20 Newspaper printing Link
TC Transcontinental - Printing plant Jun-20 No Data Gatineau, QC TC Transcontinental Montreal, QC 6/17/20 Newspaper printing Link
Starnet Printing Aug-20 No Data Mahwah, NJ None N/A Jun-20 Commercial printing Link
Arandell - Printing plant 7/31/20 No Data Walton, KY Arandell Corp Menomonee Falls, WI Jun-20 Catalog printing Link
Loudon Machining
(manroland service organization)
Jun-20 No Data Effingham, IL manroland Goss Americas Durham, NH 6/10/20 Consolidation into NH location Link
Duluth paper mill Jun-20 No Data Duluth, MN Verso Paper Memphis, TN 6/9/20 Paper mill, graphic paper grades Link
Wisconsin Rapids, WI Jul-19 No Data Wisconsin Rapids, WI Verso Paper Memphis, TN 6/9/20 Paper mill, graphic paper grades Link

Sunday, June 7, 2020

Regional Print Consolidator Builds Diverse Offerings – May 2020 M&A Activity


Graphic Village, based in Cincinnati, Ohio, has added another distinctly different avenue to its diverse community of companies with the acquisition of DMS ink. Formerly known as Dayton Mailing Services, the acquired company brings high-volume personalized direct mail capabilities to the regional consolidator of print-related companies.

Aptly named, Graphic Village began about a decade ago as a loose partnership. Bramkamp Printing, a commercial printer, served as the core company, cross-selling services with other Cincinnati graphic companies including DocuPros Digital Printing, Premier Mail and Fulfillment, Everything’s Image apparel decorating, and Quality Custom Binders. Bramkamp and DocuPros eventually merged, taking on the name of the consortium as the new graphic services platform for Cincinnati-based private equity firm Revitalize Capital.

With the strategic vision of a multi-prong diversified graphic services provider firmly baked into its DNA, the series of acquisitions have not only built on the company’s core commercial printing services, but also branched out into marketing services and folding carton manufacturing. The purchase of direct mail provider DMS ink brings data management, high-speed inkjet personalization, mail preparation, and postal optimization into the Graphic Village family. High-volume direct mail services are traditionally not the typical playing field for a commercial printing company, and we suspect that the acquisition is likely to bring the Graphic Village group into competition with an entirely new league of players. The highly diverse strategy is in sharp contrast to that of other consolidators that are serial acquirers of similar building blocks, adding to their strength in one clearly defined core competency (see The Target Report: Catching the Wave in Corrugated Cartons, February 2020).

The acquisition of DMS ink, 60 miles from the company’s home base in Cincinnati, represents another leap of a different sort for Graphic Village. The prior acquisitions have notably all been located within a few miles, close by, just over the Ohio River in Kentucky, or in Cincinnati itself. In this regard, Graphic Village is part of a growing trend we have noted, that of the regional consolidator building out a network of complementary locations within a distinct geographic region or corridor (see The Target Report: Commercial Printing: Consolidation or Regional Expansion? November 2019).





Packaging

Brook & Whittle, a Connecticut company that manufactures prime labels, has acquired the Croydon, Pennsylvania shrink sleeve manufacturing facility. With backing by private equity firm Snow Phipps Group since October 2017, Brook & Whittle has been building out the platform originally backed by RFE Partners and Charter Oak, two private equity firms that had jointly acquired Brook & Whittle in 2009. Snow Phipps added to Brook & Whittle in October 2018 with the purchase of Prime Package and Label.

The Croydon facility was formerly known as Gilbreth Packaging Solutions, an innovator in shrink sleeve technology. The company’s engineers solved the distortion problems when shrinking films onto “full body” shaped packages and helped pioneer the now ubiquitous shrink sleeve labels market over 40 years ago. Gilbreth also was one of the first companies to introduce gravure printing on shrink film. The Gilbreth name disappeared almost ten years ago when Cenveo acquired the company in its now aborted foray into the packaging business (see The Target Report: The De-Evolution of Cenveo, April 2019)

Update: The Impact of Covid-19

Numerous newspapers and magazines appear to be early casualties of the Covid-19 crisis which is hitting the struggling publishing industry. Outlook Newspapers, a small operation in La Cañada, California, purchased three local newspapers, including the Burbank Leader, from the Los Angeles Times. The parent company had announced that publication of the three papers was scheduled to cease, reportedly due to the economic decline brought on by the outbreak of the coronavirus. The buyer, Outlook Newspapers, has announced plans to continue publication of the titles.

Nordstar Capital, a private equity company apparently formed for the sole purpose of buying Torstar, the publicly held owner of metro newspaper The Toronto Star, has announced an offer to take the company private in a deal valued at $38.7 million ($US). The company has reported dismal financial results. With a negative EBITDA, a multiple is a meaningless metric. Looked at a different way, the price offered represents just 11.4% of revenue, based on reported trailing twelve month revenues of $339 million ($US).

Forum Communications, based in Fargo, North Dakota, has announced the closing of two Minnesota local papers published by the company’s RiverTown Multimedia subsidiary. The Minneapolis StarTribune reported that six other local newspapers were all shutting down by the first week of May or had already ceased publication in April. The falloff in advertising due to the coronavirus was cited as the proximate cause.

Jostens, owned by the multi-billion dollar Platinum Equity private equity fund, announced the permanent closing of its yearbook publishing and printing facility in Visalia, California. The company noted that its products were highly cyclical and tied to high school and college graduation events. With schools closed across the country, the company has experienced an unexpected loss and decided to shutter the plant permanently.

Cenveo announced the closure of Cadmus Specialty Publications, its magazine printing plant in Richmond, Virginia, reportedly leaving several regional publications scrambling to find alternative sources to print and mail their magazines. Cenveo’s WARN act notice blamed the shutdown on the Covid-19 pandemic, noting that customers have ceased work permanently, or cancelled and delayed print projects.

We found only one bankruptcy filing in May, the Chapter 7 liquidation filing of Scheffer Printing, a small commercial printing company in Charleston, Missouri. It appears that the larger multi-plant companies are reacting quickly to the decline in business, closing facilities to rationalize capacity, able to shift work to remaining plants. Smaller companies are hanging on, at least for now, not having the option to move work to alternative facilities. With the economy “opening up” just as the initial PPP loans are hitting the original eight-week deadline to spend-and-be-forgiven, the fate of many small and midsize printing companies may hang in the balance.



2020 May - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenues
($Mil )


Party #1 Address


Deal Party #2
Pre-Deal
Revenues
($Mil )


Party #2 Address
Date
Deal
Public
Deal
Value
($Mil)

Deal Structure
(Intermediary)


Notes

Press
Release
Nordstar Capital No Data Toronto, ON Toronto Star
(Prop. Torstar)
$339.2 Toronto, ON 5/26/20 $38.7 Acquisition Metro newspaper Link
Graphic Village
(Port co. Revitalize Capital)
$22.0 Cincinnati, OH DMS Ink No Data Yellow Springs, OH 5/20/20 No Data Acquisition Direct mail printing Link
Total Ink Solutions No Data Hackensack, NJ Champion Ink No Data North Bergen, NJ 5/7/20 No Data Merger Screen printing inks Link
Brook & Whittle
(Port co. Snow Phipps Group)
No Data North Branford, CT Croydon
(né Gilbreth Packaging, Div. Cenveo)
No Data Croydon, PA 5/7/20 No Data Acquisition Shrink sleeves Link
Graphic Dimensions No Data Austell, GA FormsAmerica No Data New Albany, IN 5/5/20 No Data Acquisition Forms printing Link
Outlook Newspapers No Data La Cañada, CA Burbank Leader (+2 titles)
(Prop. Los Angeles Times)
No Data Burbank, CA 5/2/20 No Data Acquisition Community newspapers Link
Metro Printing Products No Data Greenwood, In Class Print Solutions No Data Jeffersontown, KY 5/2/20 No Data Acquisition Commercial printing Link
Great Little Box Company No Data Richmond, BC Ideon Packaging No Data Richmond, BC 5/1/20 No Data Acquisition Folding & corrugated boxes Link


2020 May - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenues
($Mil )



Case #



Filing Party Address



Circuit



Region & City



Judge



Attorney for Debtor



Notes
Chapter 11 Filings:
No Chapter 11 Filings Found this Month --- --- --- --- --- --- --- --- ---
Chapter 7 Filings:
Scheffer Printing, LLC 5/15/20 No Data 20-10388 Charleston, MO 8th Eastern MO
St. Louis
Barry S. Schermer D. Matthew Edwards  Commercial printing

2020 May - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenues
($Mil )



Closing Address
Related Party Related Party
Address
Date Closure Public


Notes

Press
Releases
Jostens - Printing plant 10/15/20 No Data Visalia, CA Jostens
Port co. Platinum Equity
Minneapolis, MN 5/7/20 Yearbook publishing & printing Link
Cenveo - Printing plant May-20 No Data Richmond, VA Cenveo Stamford, CT 5/6/20 Former Cadmus Communications plant Link
Bulletin & 6 other papers 5/6/20 No Data Woodbury, MN RiverTown Multimedia
(Sub. Forum Communications)
Fargo, ND May-20 Community newspaper publishing Link