Blackstone exits Avintiv for $2.45bn

October 2015 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Private equity giant the Blackstone Group LP is to exit its investment in its portfolio company Avintiv Inc after announcing that the business is to be acquired by the Berry Plastics Group Inc in a deal worth around $2.45bn. The deal for Avintiv, which makes materials used in a variety of products including feminine hygiene products, surgical masks and disinfectant wipes, is expected to close by the end of 2015.

By exiting the company now, Blackstone, the world’s largest private equity firm, will recoup around a 200 percent gain on its initial acquisition of Avintiv. Blackstone purchased the company in 2011 in a deal valued at $326.2m. The company acquired PGI Specialty Materials Inc, as Avintiv was then known, from fellow private equity group MatlinPatterson in a cash transaction.

In a statement announcing the deal, Joel Hackney, Avintiv’s chief executive, said, “Avintiv has made tremendous progress advancing our mission to create a safer, cleaner, and healthier world. Joining Berry creates an ideal platform to expand into new adjacencies, strengthen our current capabilities, and bring new innovations to our customers. Our employees’ hard work and dedication has enabled us to deliver consistent growth and margin expansion and will continue to play a critical role in the success of Berry.”

Under Blackstone’s management the company underwent a rebranding exercise becoming Avintiv in June 2015. It also became the world’s largest maker of nonwoven fabrics through acquisitions. In November 2013 the company completed the acquisition of Fiberweb, one of the largest global manufacturers of specialised technical fabrics, in a deal worth around $287.8m. Fiberweb added eight production sites in six countries to Avintiv’s portfolio of assets. In June 2014 the company also purchased Providência for $424.8m, acquiring three nonwoven manufacturing operations — two in Brazil and one in the US. In 2015 the company also completed a deal for Dounor, a manufacturer of nonwovens used for hygiene, healthcare and industrial applications.

Some of Avintiv’s largest customers include firms such as Procter & Gamble Co, Kimberly-Clark Corp and Cardinal Health Inc. Furthermore, the two companies share many of the same customers – another reason why optimism about the deal is so high at Berry Plastics. “We’re already making a lot of film products and a lot of film products going specifically into the hygiene and health care space,” said Brett Bauer, leader of the mergers and acquisitions team at Berry Plastics. “And a good portion of this business is doing the same thing. It really is a natural fit,” he said.

Following Avintiv’s recent spate of M&A transactions, Avintiv now operates 23 locations across 14 different countries with over 4500 employees. Indeed, the company is believed to be three times the size of its closest competitor, according to Avintiv’s website. Avintiv had sales of $2.1m in the 12 months through March, generating earnings before interest, taxes, depreciation and amortisation (EBITDA) of $303m. Berry’s sales were $5bn during the same period, and the company anticipates that the acquisition will allow it to realise approximately $50m of annual cost synergies.

Blackstone has been pursuing an exit of Avintiv for some time. In February, as PGI, the company filed for an initial public offering noting that its net loss had nearly tripled to about $97m in the nine months up to 27 September 2014. Sales during that same period rose 2.2 percent to $1.5bn.

Berry noted that it will finance the deal via committed debt. The company may also sell some equity to result in a net debt to adjusted earnings before EBITDA ratio of approximately five times. However, raising the equity will depend on market conditions.

“We are extremely excited to welcome the team and global capabilities of Avintiv to the Berry organisation,” said Jon Rich, chairman and chief executive of Berry Plastics. “The combination of Berry Plastics and Avintiv creates a global leader in plastics packaging and engineered specialty materials with enhanced technology, material and commercial capabilities to more broadly serve our customers.”

Richard Summerfield