Deal in Focus: Advent buys Faerch Plast from EQT

Advent International has agreed to acquire Danish plastic food packaging company Faerch Plast from EQT Partners. Financial details of the transaction remain undisclosed, though Danish media reports the purchase price was between DKK 6.5-7bn. The transaction is thought to be 5.5-6x leveraged in line with other recent comparable deals.

EQT described its investment objectives for the company as "successfully executed" in a press release. Sales and EBITDA have more than doubled between 2013 and 2016 from DKK 1.08bn to DKK 2.2bn and DKK 236m to DKK 537m respectively.

This growth has been partly organic and partly driven by the acquisitions of Anson Packaging and Sealed Air's European tray business in 2015.

Money isn't everything
Advent's Ranjan Sen explains that winning the bid was not just about price: "This was a standard auction process with a number of strategic bidders as well as private equity funds competing. Developing a trustful relationship and dialogue with management early on, in combination with sector knowledge, was therefore key to winning the auction."

Advent plans to use its international network to create a more global brand" – Ranjan Sen, Advent International

This involved developing a good personal relationship but more importantly a good strategic relationship from the start. "We aligned early with management on our strategy, which includes earmarking additional equity for M&A activities," says Sen. "We are considering green-field investments as well, but the market is positioned for further consolidation."

The company's M&A activities will have a wider focus than they did under EQT as Advent looks to capitalise on its global reach to drive further growth. "Under EQT's stewardship, the business focused predominantly on the Nordic countries and on the UK. Advent plans to use its international network to create a more global brand," says Sen, noting that Advent already has strategic interest in this sector through its recent US acquisition Fort Dearborn.

The two companies operate in very different sub-sectors, but both represent the start of buy-and-build strategies in the food and beverage packaging space. Says Sen: "While there are no direct operational synergies with Fort Dearborn, both companies benefit from the sector knowledge and relationships we have developed globally as a firm."

Details of the transaction's financing have not been released. However, a source familiar with the situation said a group of Nordic banks are working with two larger European banks to provide 5.5-6x turns of leverage for the transaction.

EQT acquired Faerch Plast via its sixth fund for an undisclosed sum in February 2014. It planned to invest in new product development as well as financing add-on acquisitions.

Founded in 1969 by Rasmus Faerch, Faerch Plast is headquartered in Holstebro, Denmark, but has seven production sites located in Denmark, the UK, the Czech Republic and Spain. It employs 1,100 people in total, across these sites and local operations in more than 15 countries. The company manufactures rigid plastic trays in all major plastic resins, which it sells to food producers, distributors and retailers. It recorded DKK 537m in EBITDA from DKK 2.2bn sales in 2016.

People
Advent International – Ranjan Sen (managing partner); Benjamin Buerstedde (director).
EQT Partners – Mads Ditlevsen (partner).
Faerch Plast – Lars Gade Hansen (CEO).

Advisers
Equity – Rotschild (M&A); Atrium Partners (M&A); Bain & Company (commercial due diligence); Food Strategy Associates (commercial due diligence); EY (financial due diligence); Freshfields (legal); Bech-Bruun (legal).
Vendor – Credit Suisse (corporate finance); FIH (corporate finance); Plesner (legal); PwC (tax due diligence); Cowi (environmental due diligence).

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• Topics
• Nordics
• Buyouts
• Industrials
• Deal in focus
• EQT
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• Secondary buyout