NEW YORK (Reuters) – BWAY Corp, one of the largest makers of rigid metal and plastic containers in North America, is considering a sale that could fetch around $2 billion, less than two years after it changed private equity ownership, people familiar with the matter said on Tuesday.
A potential sale of BWAY would be the latest in a wave of deals in the industrial and consumer packaging sectors as a modest economic recovery spurs private equity firms to seek out companies in this space with strong cash flows and high barriers to entry.
Platinum Equity LLC, which acquired BWAY from private equity peer Madison Dearborn Partners LLC in November 2012 for $1 billion, has met with banks recently to discuss selling the packing company later this year, the people said.
Platinum is in the early stages of contemplating an exit and has yet to begin a process of finding a buyer, the people added, asking not to be named because the matter is not public.
Representatives for Platinum Equity could not be immediately reached for comment.
Launched in 1875 as maker of pie tins and other household items, Atlanta-based BWAY now manufactures products from steel and plastic that are used in the packaging of paint, automotive additives, food and household goods.
BWAY generated net sales of $1.4 billion and earnings before interest, tax, depreciation and amortization of $190.5 million in 2013, according to the company’s latest annual report.
BWAY added to its debt pile to fund a $239 million dividend to Platinum last year, allowing it to recoup most of the $267.4 million the private equity firm invested in the $1 billion leveraged buyout of the company in 2012, according to Moody’s Investors Service Inc.
Madison Dearborn, which acquired BWAY in 2010 for $915 million from private equity firm Kelso & Co and public shareholders, had also deployed the same “dividend recapitalization” strategy of having the company borrow to pay a dividend.
Private equity firms tend to hold onto their investments for an average of three to seven years. The quick flips seen in BWAY have not been without controversy, with job cuts and plant closures blamed by some on its aggressive use of debt to fund acquisitions and pay out dividends.Get your FREE trial or subscribe now to Buyouts to find new deal opportunities, super-charge your fundraising efforts and track top managers.