Transcontinental acquires Coveris Americas

By Jim Cornall

- Last updated on GMT

Coveris Americas manufactures flexible plastic and paper products, including rollstock, bags and pouches, coextruded films, shrink films, coated substrates and labels.
Coveris Americas manufactures flexible plastic and paper products, including rollstock, bags and pouches, coextruded films, shrink films, coated substrates and labels.
Canadian company Transcontinental Inc. has agreed to acquire the business of Coveris Americas, a business held by Coveris Holdings S.A., a portfolio company of Sun Capital Partners, Inc., for US$1.32bn.

Coveris Americas is one of the top ten converters of flexible packaging and other value-added products in North America based on revenues for its fiscal year ended December 31, 2017.

Headquartered in Chicago, Illinois, Coveris Americas manufactures a variety of flexible plastic and paper products, including rollstock, bags and pouches, coextruded films, shrink films, coated substrates and labels.

As of December 31, 2017, Coveris Americas operated 21 production facilities worldwide, in the Americas, the UK and Australasia.

Coveris Americas has more than 3,100 employees, the majority of whom are located in the Americas. For its fiscal year ended December 31, 2017, Coveris Americas generated $966m in revenues and $128m in adjusted EBITDA.

Turning point

Isabelle Marcoux, chair of the board of Transcontinental, said the announcement marks a turning point in the company’s 42-year history.

“This transaction crystallizes our strategic shift toward flexible packaging and solidifies our commitment to profitable growth,"​ Marcoux said.

"We are convinced that this transformational acquisition will be a driver in the creation of long-term value for all of our stakeholders. It is with pride that we begin the next chapter of our successful journey with Coveris Americas, its employees and customers, building on our values of respect, teamwork, performance and innovation."

Dairy business

François Olivier, president and chief executive officer of Transcontinental said the acquisition adds significant depth and scale to the company’s existing platform, with flexible packaging operations now expected to be the largest division in terms of Transcontinental's revenues based on its fiscal year 2017.

“This transaction complements and bolsters our existing product offering in several flexible packaging end markets including dairy, pet food and consumer products,”​ Olivier said.

“Additionally, it allows us to enter new and attractive flexible packaging end markets such as agriculture, beverage and protein. We are also eager to welcome Coveris Americas' talented employees who will bring their leading-edge expertise to TC Transcontinental."

Cost synergies

The terms of the acquisition have been approved by the boards of directors of both TC Transcontinental and Coveris Americas.

The acquisition, which remains subject to certain customary closing conditions and receipt of applicable antitrust approvals, is expected to be completed in the third quarter of TC Transcontinental's fiscal year 2018.

Expected annual cost synergies of approximately $20m are expected to be achieved over a 24-month period following the acquisition, generated mainly from economies of scale.

The acquisition will be financed through a combination of cash on hand; and financing from CIBC and Scotiabank providing term loans.

Transcontinental's pro forma net debt to adjusted EBITDA is expected to be 3.2x at the closing date of the acquisition and to decline close to 2.0x by the end of fiscal year 2020.

Other business

In March, Transcontinental acquired another Illinois-based company, Multifilm Packaging Corporation, a flexible packaging supplier for the confectionery and snacks industry, located in Elgin, near Chicago.

In November 2017, Transcontinental acquired Les Industries Flexipak Inc., a flexible packaging supplier in Montréal, Québec, which employs 55 people. Flexipak is a converter specialized in flexographic printing, lamination as well as bag and pouch making, and the acquisition expands Transcontinental’s capabilities in eastern Canada.

The acquisitions have been made as Transcontinental has been selling off many of its Canadian daily and weekly newspapers. It sold more than 50 Quebec publications, as well as its entire Atlantic Canadian newspaper portfolio in 2017.