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Private equity funding creates an ink and plates giant



Published September 8, 2005
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Narrow Web Europe
Private equity funding creates an ink and plates giant
By Barry Hunt

Only a few months ago BASF Printing Systems and ANI Printing Inks merged to create XSYS Print Solutions. Now it plans to swallow up Flint Ink, a sizeable group in its own right. The as-yet unnamed group will create the world’s second largest ink maker, behind Sun Chemical. Including analog and digital printing plates, the combined turnover is around US$2.6 billion, with a workforce of 8,000 employees. The deal is expected to gain the approval of the European Union regulatory and competition authorities in late September.

In a sign of the times, the deal was put together by CVC Capital Partners, an independent private equity firm. It has funds of US$11 billion and is based in London with offices throughout Europe. From 1981 to 1993 it was owned by Citicorp. These type of venture capitalists specialize in leveraged buy-outs and are now prominent in driving acquisitions and mergers throughout western European. They are particularly active in industries with historically low margins, such as the graphics industry. Here, even quite large companies hit a financial ceiling in funding growth by acquisition, especially publicly-quoted firms with commitments to shareholders and pension funds. By their very nature, venture capitalists are unhindered by these considerations or have any commitment to any particular industry. The worst seek to make quick profits by stripping assets, cutting payrolls and selling freehold land holdings. Nevertheless, some do appear to enhance their industry connections and build portfolios of related interests. CVC appears to be in this category since over the past decade it has invested heavily in European packaging, paper and container board companies.

Of course, behind every major takeover there is a personal element. For Flint Ink — of Ann Arbor, MI, USA — the deal ends 85 years of family ownership. H. Howard Flint II, who died in June of pancreatic cancer at age 66, played a major role in growing the business into a billion-dollar operation with nine global divisions, including Flint-Schmidt, the European operation, and Jetrion, a developer of UV-

curable inkjet technology. Dave Frescoln, who was appointed chief executive officer in January, keeps this post in the new group, while XSYS chief executive Peter Koivula becomes vice chairman. XSYS has 60 subsidiaries in 30 countries, producing inks and plates for the graphics and packaging industry. Its headquarters are in Stuttgart, Germany, and there are 3,600 employees producing an annual revenue of US$1.07 billion.

Predictably, the corporate line is that the customers are the ultimate winners: “Flint Ink, XSYS and CVC are creating a stronger competitor better placed to serve customers in a fragmented market, where size is of critical importance for the success of the business,” says Christian Wildmoser, CVC’s managing director. “We are continuing to globalize the businesses following the needs of our customers in the printing industry. The transaction will significantly strengthen the combined group’s positions in each of its core inks segments.”

• XSYS Print Solutions recently agreed to form a partnership with Microtrace LLC to deliver a traceable ink for narrow web label printers to help deter counterfeiting. The Microtaggant UV-curable inks can be printed on most substrates using flexo or screen printing. They offer a unique numeric code sequence in a multiple colored layer format delivering multiple layers of security through a single microscopic particle.

Canadian manufacturer goes Dutch in web press deal

Another major industry acquisition, this time privately funded and involving two press manufacturers with a lot in common. It is of course the news that Drent Goebel has acquired RDP Marathon. The Dutch company’s acquisition trail began in January 2001 when it took over Goebel’s financially troubled web press division, based in Darmstadt, (it still makes offset modules for Nilpeter’s MO series), hence Drent Goebel. In 2003 it acquired Giebeler, another long established German narrow web press manufacturer. Group headquarters are in Eerbeek, Holland, where Drent Graphic Machines was founded in 1938. In 1996 the privately owned company introduced the Vision SMR, the first narrow web press to use servo drives for all functions.

RDP Marathon was formed in June 1989 by former managers of MAN Ashton. Located in Laval, north Montreal, Canada. It has a reputation for building robust offset, gravure and flexo presses. Its line includes the V-series blanket-to-steel and the P-series perfecting web offset presses in widths up to 38". They are said to complement the Drent Goebel portfolio, led by the Vision/VSOP (Variable Sleeve Offset Printing) series of hybrid offset presses. Both companies target the packaging sector, including glue applied and PS labels, flexible packaging and small folding cartons. Historically, they were traditionally associated with the business forms and document markets.

This synergy led to an earlier crossing of paths in the form of a strategic marketing alliance announced in August 2002. It involved the selling and support of specific models in Europe, the USA and Canada. However, the deal never went ahead and was quietly forgotten. Having acquired the Canadian company for an undisclosed sum, Drent Goebel is now keen to maximize its North American presence from an existing sales and service office near Chicago. Customer-service and support details will be announced in the coming months, including at Labelexpo Europe.

CCL rescues former Avery-MBO converter

Merroc Ltd. in Cumbernauld, near Glasgow, Scotland, has found a buyer after going into receivership. The firm was rescued by CCL-Pachem, saving 15 jobs. The officially-appointed receiver — whose job is to sell the assets of failed businesses — was appointed by Merroc on June 30. Supported by customers, the company continued to trade, but around 50 staff were made redundant.

Merroc was bought out by its management team from Avery Dennison in 2001. Its turnover for 2004 was around £4.61 million ($US8.37 million). According to the receiver, Merroc’s downfall followed an expansion into business that proved to be loss-making. Its specialities included resealable labels, security products, booklet labels for international clients, as well as color chip labels for European paint manufacturers. CCL-Pachem’s UK site in Rhyl, north Wales, also supplies decorative labels for the paint industry.

• Toronto-based CCL Industries has bought the remaining 49 percent of its European joint venture, CCL-Pachem. CCL began a joint venture with Pachem AG, an Austrian label and packaging group, in 2003. It has operations in Austria, France and the UK producing pressure sensitive, shrink sleeve and in-mold labels.

Label companies take reflexive action

There’s nothing wrong with a bit of consolidation now and then. Especially when you have a label group consisting of three companies with disparate names, such as Easedale Labels, Scanvaegt Labels and Icon Labels. Furthermore, each of the UK converters claim to specialize in a different area of label production. Now they have come together under the “Reflex” name. Ian Kendall, managing director, says it is an attempt to reduce costs, consolidate the business and improve its representation.

The sites will now be named Reflex Labels Leeds, Reflex Labels Leicester and Reflex Labels Mansfield, while a fourth division, Reflex Systems, will also operate from Mansfield to provide labeling equipment under the Icon brand. The Leicester site produces plain labels and tray cards, the Leeds operation prints labels for the food sector and outsourcing companies, while the Mansfield site specializes in tags, tickets and cold and hot foil blocking.

“The labeling industry has been in the doldrums for some time now, but Reflex is bucking that trend with dramatic growth which must in part be due to the company’s high levels of efficiency,” claims Kendall. Since being acquired 18 months ago the Leeds site has doubled its turnover and output with no change in staff numbers.



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