Live Deals: Chase Capital Bids $1.1B for Huntsman Packaging Corp. –

Chase Capital Partners has inked a deal to buy Huntsman Packaging Corp. for approximately $1.065 billion from Utah billionaire Jon Huntsman, who owns 61% of the company.

Aside from the hefty transaction price, the deal is unique to the buyout world for the way Huntsman, the company’s founder and current chairman, will use the proceeds of the sale. Huntsman, a cancer survivor whose mother and father both died of cancer, plans to donate the profits to charity to promote medical research, specifically contributing a large sum to the Huntsman Cancer Center at the University of Utah.

Salt Lake City-based Huntsman Packaging Corp., an affiliated but separate company from Huntsman Corp., a large petrochemical concern, makes plastic films and flexible packaging used to wrap food and consumer products. It was established in 1992 to acquire Goodyear Tire and Rubber Co.’s film products division. Since that time, the company has acquired 13 additional film and packaging businesses, most recently buying the technology for Ziploc storage bags.

Richard Durham, who owns 35% of Huntsman Packaging, will remain the company’s president and chief executive and also will take over as chairman, a position previously held by Huntsman.

Should the deal close, Chase Capital reportedly will pay more than 11 times earnings before interest, taxes, depreciation and amortization (EBITDA) for the company.

Industry observers have said that Chase Capital might be overpaying since packaging industry companies’ valuations are down, typically trading at six times 2000 EBITDA.

Partners at Chase Capital did not return calls for this article.

Huntsman Packaging had sales of more than $800 million last year and employs approximately 3,800 people. It operates 24 manufacturing, research and development facilities worldwide.

Huntsman reportedly will receive approximately $345 million from the sale, which is expected to close this quarter. Since 1993 Huntsman has pledged a total of $100 million to establish the Huntsman Cancer Institute and is known for giving away at least that much to different charitable causes each year.

Chase Capital Partners already has several packaging companies, on several continents, in its diverse portfolio. Its North American packaging interests include Aerosol Services, an aerosol and non-aerosol packaging company; Berry Plastics, a manufacturer of injection-molded plastics for the packaging industry; Xpander Pak Light-weight, a manufacturer of packaging materials; and Stull Closure Technologies, provider of functional plastic closures for use in consumer goods packaging.

If the future of packaging businesses looks bright, the public markets have not yet realized it, as is evident in the case of Madison Dearborn Partners’ experience with Tenneco Inc.

The firm joined with Tenneco’s packaging unit to buy out the conglomerate’s corrugated box-making business, Packaging Corp. of America, for approximately $2 billion early last year (BUYOUTS Feb. 8, 1999, p. 5). The two groups planned to exit Tenneco’s 45% stake in the company through an initial public offering in November, but poor market conditions for paper and forest-products companies led executives at Tenneco to postpone the IPO until early this year.

At press time, Packaging Corp. of America’s stock was trading at $10.31 per share, compared to a high of $12.19 at the end of January.

Other buyout firms that own or have owned packaging companies include Castle Harlan, Mason Wells, PNC Equity Management Corp. and Cravey, Green & Wahlen.