In service to the beauty industry, both companies specialize in paper, box wrap, folding boards and a spectrum of finishes for these.
Neenah already operates globally. With manufacturing in the States and Germany, it distributes to over 70 countries. FiberMark is also a global player, and this deal brings that company’s six US manufacturing sites as well as a UK manufacturing facility into the mix for Neenah.
Describing the acquisition, John O'Donnell, CEO of Neenah, says, "FiberMark is well known in the marketplace for its high touch service as well as a meaningful breadth of premium coated, textured and colored products.”
Planning ahead
The company is making an effort to expand beyond specialty paper. There are plans to grow the technical products side of the business; that comprises tapes, labels, abrasives, and more. This particular acquisition is likely part of an overall plan supporting that expansion, as buying up FiberMark will make Neenah more competitive in the paper space and, in doing so, plausibly economize the company cost structure.
“The acquisition adds new capabilities that will further accelerate our strategy to expand in targeted growth areas like premium packaging and performance materials, and complements previously announced strategic investments supporting the continued growth of our filtration business," O'Donnell tells the press.
With an eye on the paper side of the business, O’Donnell explains that "the combination of FiberMark and Neenah increases the size and our reach in many of our addressable markets and provides opportunities to accelerate growth with a wider range of capabilities and products to better serve our customers.”
Dollars and such
In May Neenah released Q1 results. In fine paper and packaging, shipping volume was down 3% and net sales were $101.4m, also down from 101.5m in the same quarter of 2014. Operating income was notably higher year-over-year, at $17.4m, up from $13.3m due to lesser input costs and improved price and mix of products, according to the results report.
To acquire FiberMark, Neenah spent $120m to buy all outstanding equity of the company (which has annual sales upwards of $160m) from an affiliate of American Securities.
“From a financial standpoint, the investment represents an attractive use of capital with a mid-teen rate of return, is not dilutive to our EBITDA margins and will be immediately accretive in year one,” says O'Donnell.
In a press release announcing the deal, Neenah notes, “it expects one-time costs in 2015 of approximately $5 million for transaction fees and integration, with synergies exceeding $6 million per year within three years.”