Cambridge Refines Plastics Plan –

Can other people’s trash be a treasure?

Chicago-based Cambridge Capital Partners thinks so. The firm’s portfolio company, National Container Group LLC, which prepares containers for re-use, has just acquired the assets of RLI Inc. for an undisclosed sum.

CCP, which is roughly one year old, acquired National Container Group, the nation’s largest “reconditioner” of plastic industrial containers, in September 2001. CCP owns 51% of the company, while management owns the remainder. RLI represents CCP’s third investment, and the firm has invested about $22 million in equity to date, said Partner David Posner.

RLI, which also operates out of Chicago, specializes in the cleaning and reselling of a variety of industrial bulk containers.

“The acquisition increases the overall size of National Container by about one third,” said Posner.

Founded in 1988, National Container Group cleans and refurbishes used plastic drums and intermediate bulk containers about 2.5 million units annually through facilities located in Chicago, Cleveland, Houston and Charlotte, N.C.

“This acquisition is immediately accretive to NCG both from a revenue and earnings perspective, but more importantly, from a human resources perspective,” said Posner. “RLI has an outstanding sales team and logistics group.” Regarding National Container, he added, “We’re backing a management team that previously consolidated the steel side of the business very successfully and took it public.”

Posner said the growth strategy for National Container is just like the name says: national. He envisions National Container operating on a national scale much like U-Haul operates its moving truck business.

“U-Haul works because if you drive from Boston to L.A., there’s an L.A. U-Haul,” he said. In plastic industrial containers, “The biggest cost is the transportation of the empty drum. Now National Container has multiple locations throughout the country, so they’re able to keep the drums in inventory at the local level and re-use them locally…just like U-Haul does [with its moving trucks].”

Additionally, although plastics is not a new industry, advances in recent years have made plastic the container of choice over steel and fiber drums, said Posner.

“Until recently the characteristics of plastic weren’t strong enough, but plastic has now advanced. The growth prospects are very strong. Plastic is cheaper and lighter,” he added. “In addition, companies, especially in the thick of a downturn, are looking to save costs. The profit margins are high because you’re getting the product for free or you’re getting paid for it.”

Although Cambridge Capital is only about a year old, it is aligned with 25-year-old Cambridge Group, a consulting firm.

“They don’t own us,” said Posner. “We’re partners. When we go into a private equity deal and take a controlling interest, they provide consulting services to the management teams in return for equity. It’s a nice kind of value-added model. [For example], the former senior logistics person for G.E. is a partner in the Cambridge Group, and she’s helping National Container improve its logistics. So it’s giving kind of Fortune 500 advice to smaller companies.”

And in terms of exits, Posner sees a lot of possibilities.

“Having a captive mechanism like this could be attractive,” he siad, to companies whose factories use an enormous number of containers, such industrial service providers, or those that perform facility management for factories.