Specialty label, security and packaging solutions supplier CCL Industries has entered into a definitive agreement to acquire the Innovia Group for approximately $1.13 billion from a consortium of UK-based private equity investors managed by The Smithfield Group.
The deal is subject to regulatory approval but the Canadian firm anticipates closing on it by the end of the first quarter 2017.
Geoffrey Martin, chief executive of CCL, believes that the transaction will propel his company to world leadership in the fast-growing polymer banknote market while strengthening its materials science offering with proprietary BOPP films technology for the label, packaging and security sectors.
“We expect to find significant operational, customer and product innovation growth opportunities between Innovia and our end use facing businesses at CCL Label, CCL Design, Checkpoint and Avery,” said Martin. “CCL’s 2017 pro-forma annual sales are forecast to exceed $5bn post-close. The transaction will be financed from existing capacity in our revolving credit facility and a new $450 million, two-year term loan provided by a syndicate of banks. At closing our expected pro-forma net debt to EBITDA leverage ratio is estimated at a conservative 2.5 times, with additional balance sheet liquidity of approximately $700m.”
Headquartered in Wigton, UK, Innovia has film extrusion, coating and metallising facilities across the UK, Belgium and Austria as well as specialised polymer banknote operations in the UK, Australia and Mexico, with 1,200 employees and sales offices in 16 countries. For 2017, Innovia is expected to generate net revenue of $570m and EBITDA of $155m.
Innovia was behind the new £5 note that was introduced in the UK this year but that has come under fire after it emerged that it contains a small amount of tallow, derived from animal waste products. Innovia was reported to be working on solutions to the issue, after more than 100,000 people signed a petition to ban the note.
In June 2016, Innovia Group sold its Cellophane business and assets to Futamura Chemicals of Japan, saying it was going to focus on its polymer banknote business and ‘double bubble’ BOPP films business.
Industry expert Nicholas Mockett, who works for Moorgate Capital, told Plastics in Packaging: “Innovia is a differentiated player in flexible packaging. Although BOPP is not unique, Innovia is unusual in using bubble technology, which results in superior quality films. Key market segments are tobacco and labels. In addition, Innovia adds value to the film resulting in sophisticated security applications including for polymer bank notes.”