In an auction, which the sellers say attracted a high level of interest from both strategic and financial suitors, Wind Point Partners sold its stake in Alloyd Co., a Dekalb, Ill.-based manufacturing company, to strategic buyer SCA North America for $97 million.
Wind Point owned 50% of Alloyd, and realized an IRR of 18%, on a return of 4.5 times its initial $5.5 million investment. The total purchase price Wind Point paid for Alloyd in 1989 was approximately $35 million.
Alloyd spent 14 years in the Wind Point portfolio, during which time the buyout shop overhauled management, which included naming Ed Parkinson CEO in 1990, then moving him to chairman and promoting Ron Leach to chief executive. According to Mike Mahoney, Wind Point CFO and Alloyd board member, the company also put in place six regional manufacturing sites in North America. Mahoney said Alloyd increased revenue by 2.5 times and EBITDA by 3.5 times over the life of the Wind Point investment.
Houlihan, Lokey, Howard & Zukin served as advisor for the deal, and conducted the auction earlier this year. “Interest was as high as we’ve seen in companies like this for several reasons,” said Jeff McKenzie, managing director and head of the plastics and packaging group at Houlihan Lokey. “First, Alloyd has grown in the mid single digits in sales and even higher in profit growth. They’ve also gone through operational efficiencies, and their products are benefiting from current retail trends.”
Those trends include see-through packaging, which is precisely Alloyd’s focus. The company makes high-visibility packaging, known as blister packaging, and the company allows its clients one-stop shopping capabilities. “Alloyd designs the packaging, makes the tooling for the blisters, makes the blisters and sells the sealing equipment and tooling used to seal the end product,” said McKenzie. “In the customer packaging business, everything is about lead times, and packaging is usually the last thing a company works on. So when they get to it, everybody wants our product fast.”
McKenzie said new-fangled fluorescent light bulbs in see-through packaging improved sales because the change allows customers to see that the new light bulbs did indeed fit into standard light sockets. Another plus he added, is shoppers tend to open cardboard boxes to see the product prior to making a purchasing decision, which can be avoided if the package is transparent.
Strategic buyer SCA North America is a manufacturer of absorbent hygiene products and packaging, employing 5,000 people in the U.S., Canada and Mexico. But roughly $10 billion of SCA’s $11.5 billion in annual revenue comes from overseas, making Alloyd a strategic purchase when targeting in the North American market for expansion.
The bulk of Alloy’s 561 employees will co-exist with SCA’s internal packaging division, which designs and manufactures protective packaging, material handling and components for consumer and industrial products, as well as heavy-duty cartons and specialty-corrugated packaging. “SCA’s sales relative to most multi-national companies are not as high in the U.S., and the company is planning an aggressive strategy to expand its North American sales,” said a source close to the company.
Lawyers: SCA: Reed Smith; Wind Point: Sachnoff & Weaver
Advisor: Houlihan, Lokey, Howard & Zukin