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Why Clearlake and other PE firms are investing in packaging providers

Clearlake is acquiring Intertape Polymer Group, a Montreal packaging company, for $2.6bn in a take-private deal announced earlier this month.

With the rise of e-commerce during the pandemic, pent-up demand for packaging materials is driving deals. Private equity firms are jostling for their share in an industry that is heavily tied to the supply chain. We’ve seen several PE deal announcements in the packaging arena this month, including one earlier this week.

Many companies were left scrambling for packaging materials during the pandemic, as manufacturers struggled to keep up with demand. Tailor-made packaging, especially in the food and beverage sector, was especially scarce as suppliers failed to meet production and delivery deadlines.

For example, the National Restaurant Association recently flagged the shortage of packaging materials as one of the pain points the industry is facing in 2022. Last year, the National Association of American Wineries and the Distilled Spirits Council claimed their members were facing high costs in acquiring glass bottles, especially from alternative sources, as their usual suppliers reel from supply chain challenges.

These trends have opened doors for private equity firms to inject new capital and close deals that seek to enhance operational capacity, sometimes with renewed focus on sustainability.

In the biggest recent deal, Clearlake Capital, a Santa Monica, California-based PE firm that was founded in 2006 and has over $60 billion of assets under management, agreed to acquire Intertape Polymer Group (IPG), a Montreal packaging company, for $2.6 billion in a take-private deal earlier this month. The deal is expected to close in the third quarter of 2022.

IPG, which manufactures and sells a variety of packaging materials, is headquartered in Montreal, Quebec and Sarasota, Florida and has approximately 4,100 employees in its 34 locations in North America, Asia and Europe.

“The business is stronger today than when we entered the pandemic,” said Greg Yull, IPG CEO, in a fourth-quarter earnings announcement, adding that demand for its products is high. He said the global supply chain had a significant toll on the company’s operations.

Following the deal announcement with Clearlake, Yull expressed confidence that the investment will provide IPG with “operational and financial resources to accelerate our acquisition strategy, as well as organic growth opportunities, such as investing in product innovation, sustainability and market expansion.”

For other PE firms, the new deals are an opportunity to invest in packaging that is more environmentally friendly.

Cold Chain Technologies – a portfolio company of Aurora Capital Partners, a Los Angeles-based PE firm with investments worth approximately $4 billion in equity capital – acquired Packaging Technology Group in a deal announced Monday. Terms were not disclosed.

CCT described the deal as a “commitment to environmentally friendly and sustainable packaging solutions.” PTG offers sustainable, curbside-recyclable thermal packaging offerings for the life sciences industry. “By using PTG’s products, customers reduce landfill waste by millions of pounds annually and shrink the life sciences industry’s overall carbon footprint,” according to CCT.

Other deals are focused on increasing output by combining skills and resources. Earlier in March, mid-market private equity firm First Atlantic Capital’s portfolio company C-P Flexible Packaging clinched a deal to acquire Bass Flexible Packaging.

“The Bass transaction represents another step towards building a North American leader in the flexible packaging industry with differentiated capabilities,” said First Atlantic Capital managing director Emilio Pedroni. “We are excited about joining forces with Bass, which will expand our ability to meet customer needs with increased product proliferation and shorter lead times in line with today’s market demand.”

Family-owned Pritzker Private Capital’s ProAmpac, a packaging company with more than 7,000 employees that distributes products in 90 countries, announced the acquisition of Belle-Pak Packaging, based in Markham, Ontario, in February. The deal is aimed at increasing production of poly mailers for e-commerce and logistics services.

Expect to see more packaging deals as consumers continue to embrace e-commerce.