Ernst & Young Packaging Recap 2010
Momentum builds in the packaging industry.
March 23, 2011
by Canadian Packaging Staff
Ernst & Young Orenda Corporate Finance Inc., a global leader in assurance, tax, transaction and advisory services offers a positive voice stating that the global packaging industry continues its financial growth.
With the conclusion of 2010, Ernst & Young notes that merger and acquisition (M&A) transactions maintained is steady growth throughout the year, adding that along with the typical large industry deals, there were a lot of small and medium business deals.
Feeling that the packaging market sector will eventually return to its once lofty heights, Ernst & Young states that the M&A deal activity will continue throughout 2011.
But where was the 2010 momentum gained? According to Ernst & Young, it got off to a rousing start in Q1 2010 with Madison Dearborn Partners paying ~US$915-million for BWAY Corporation, one of the largest manufacturers of rigid and plastic containers in North America.
Q2 saw International Paper–a global leader in the paper and packaging industry) acquire all of the Asian (mostly China) packaging business of SCA for US$200-million. The deal consists of 13 corrugated box plants and two specialty packaging facilities.
In the Q3, the Reynolds Group purchased Pactiv (a global leader in the consumer and foodservice/ food packaging market) for a whopping US$6-billion, making Reynolds the third-largest packaging maker in the world. As well, Ardagh Glass purchased metal can manufacturer Impress Coöperatieve for US$2.3 billion.
In the final quarter of 2010, DAK Americas acquired Eastman Chemical’s performance polymers polyethylene terephthalate business for $US600 million. Ernst & Young also mentioned Rio Tinto marking the official end to its sale of certain Alcan assets.
According to Ernst & Young in its 2010 Packaging Recap, the rationale behind most of 2010’s transactions includes geographic expansion; transformational market expansion, which increased proximity to recession resilient customers; technology or capacity acquisition; and portfolio expansion.
It also notes that long-term investing to bolster both product offerings and scale was a dominant support for many of the larger acquisitions, while recent smaller acquisitions have been much more focused on specific customer, market and product acquisition, to reinforce existing portfolios.
The report continues: “Despite many of the positive transaction signs, consumer confidence and macroeconomic indicators generally remained unstable and uncertain throughout the year. At the same time, both the packaging and M&A markets have been moving forward with gradual improvements in both enthusiasm and confidence. In 2011, we expect to see more companies using their recession‑tested balance sheets and revamped cost structures to seize the growth opportunities that many have had to put on hold.”
To view a copy of the Packaging Recap, visit www.ey.com/ca/corpfinance.