Financial details of the transaction were undisclosed, but a source close to the matter told Private Equity International it was an all-equity deal of £150 million (€185 million, $244 million) from Sun’s $5 billion Sun Capital Partners V. As usual, Sun plans to refinance the deal later this year.
The exact stake acquired by Sun was also undisclosed. Prior to the deal, Paragon was owned 51 percent by the company’s management, 34 percent by Equistone Partners Europe and 15 percent by LDC, according to a statement.
Paragon, a Lincolnshire-based packaging business set up in 1994, manufactures responsible packaging for the UK food industry and numbers large UK supermarket chains such as Tesco, Sainsbury’s, Asda, Marks & Spencer, Morrisons, Coop, Waitrose and Iceland among its customers. The company has a turnover in excess of £170 million and has around 1200 employees, according to the statement.
Sun shines in packaging
People will continue to eat and continue to buy these products. And all these businesses have actually shown a remarkable resilience throughout the financial crisis
One of its portfolio companies, the French packaging business Albéa, which serves the cosmetic, perfume, and skincare markets, just made an add-on acquisition, by buying Rexam Personal Care’s cosmetic division, a producer of make-up packaging, Sun European Partners said in a separate statement today.
The firm’s other recent deals in the packaging space include Kobusch Sengewald, which was acquired in December 2011, The Britton Group, bought in April 2011, and Paccor, acquired in December 2010.
Philippe Neuschaefer, vice president of Sun European Partners, said in a statement that the firm would use its “extensive packaging and retail expertise and know-how” to turn Paragon into a “diversified industry champion” by expanding its market position and by establishing itself “even further in the areas of film and lined board”.
Neuschaefer told Private Equity International that although the packaging sector does rely on consumer spending, it remains an attractive sector. “If you look at Kobusch, Britton, Paccor, Exopack and Paragon they have in common that the products go to the food sector and the hygiene sector. These segments are not moved by GDP. People will continue to eat and continue to buy these products. And all these businesses have actually shown a remarkable resilience throughout the financial crisis,” he said.
Long term play
Equistone, formerly Barclays Private Equity, has been a long-term investor in Paragon. In November 2001, the firm invested £12 million pounds in Paragon, acquiring a 50 percent stake. In December 2005, Equistone partially exited its investment in Paragon to LDC and re-invested alongside LDC in 2007, using its €2.45 billion Fund III.
Under Equistone and LDC’s ownership, Paragon’s turnover increased from £113 million in 2007 to more than £171 million in 2011, “despite the difficult trading conditions throughout the economic downturn”, Equistone said in a separate statement. It played a role in expanding the company’s customer base, diversifying the company’s product offering and oversaw a number of add-on acquisitions as well as a change in management, it said.
Rothschild acted as the financial advisor for Equistone, while Pinsent Masons advised the firm on the legal side. The financial due diligence was done by PwC and the commercial due diligence was carried out by Boston Consulting Group. Details on the return multiple were undisclosed. Equistone declined to comment.
The Paragon exit is the eleventh divestment from Fund III, a source told Private Equity International. As of the end of March 2012, the net internal rate of return for Fund III was 8.8 percent and the net multiple was 1.3x, the source added.
The sale of Paragon was Equistone’s fifth exit of 2012. In December, the firm sold ATPI, a global travel management services business to its management, backed by Intermediate Capital Group, for an undisclosed sum. In July, Equistone sold Kermel, a producer of fire-resistant polyamide-imide fibers for textile, technical and industrial applications, to Qualium Investissement, for an undisclosed sum. In June 2012, Equistone sold its shares in Ratioform, a leading supplier of packaging solutions to TAKKT for about €210 million.
Last May, the firm sold travel payment services company Global Blue to Silver Lake Partners and Partners Group for €1 billion. Return details were undisclosed at the time, but based on a conservative 50:50 debt to equity split in the original buyout, the firm's return multiple was probably in excess of 5x.