SEE recently announced that it has signed a definitive agreement to acquire Liquibox, a pioneer, innovator and manufacturer of Bag-in-Box sustainable Fluids & Liquids packaging and dispensing solutions for fresh food, beverage, consumer goods and industrial end-markets.
This acquisition is highly complementary to Cryovac Fluids & Liquids business, the fastest growing area for SEE. Fluids & Liquids flexible packaging solutions are a $7 Billion addressable potential revenue opportunity with an attractive projected annual growth rate of about 6%.
What were the thoughts of the executive?
“This is an exciting day for SEE. Liquibox is a highly strategic acquisition to fuel growth and earnings power in our SEE Operating Engine,” said Ted Doheny, SEE President & CEO. “We look forward to welcoming Liquibox’s talented team. We strive for world-class performance & place strong emphasis on talent, sustainability, innovation & operational excellence.”
Founded in 1961, Liquibox is headquartered in Richmond, Va., employs more than 1,300 people and operates across 18 locations globally. The company estimates 2022 full year revenue of $362M. Its Bag-in-Box business is comprised of fountain beverage syrup, milkshake mix, dairy, coffee, water, wine, liquid foods and industrial applications.
The company recently launched the award-winning Bag-in-Box Liquipure® that is recycle-ready and aims to replace metallic laminated bags, and Liquibox Orbiter®, a fully automatic, six-head rotary filler that increases productivity for high volume operations.
“We look forward to partnering closely with the team at SEE. This will be a new chapter for Liquibox – a chance to accelerate innovation and bring sustainable packaging solutions to more customers and geographies,” said Ken Swanson Liquibox President and CEO.
“This move broadens the breadth of Cryovac solutions, making our portfolio stronger and more resilient as SEE navigates recessionary environments,” Doheny continued. We will generate strong synergies and accelerate innovation by combining Cryovac’s barrier bags and films and technology for fresh foods with Liquibox Bag-in-Box dispensing capabilities, unleashing significant value creation to our customers and shareholders,” Ted Doheny added.
What was the strategic rationale?
Broadens cryovac food packaging with complementary solutions. Bag-in-Box is the most efficient & sustainable way to package and dispense fluids & liquids. This packaging format is increasing penetration even in mature industries for its sustainability profile.
Tailwinds from sustainability and e-commerce secular shifts are accelerating the conversion from rigid containers to flexibles. In past economic downturns, the category has been more resilient than others, outperforming Gross Domestic Product (GDP).
Liquibox has an established position in solutions for wine, dairy, coffee and other beverages. SEE plans to complement its core competencies in barrier bag manufacturing, film extrusion & automation plus Liquibox’s Bag-in-Box & fitments to drive accelerated combined growth.
Attractive growth profile drives cost synergies
Liquibox has a strong financial profile and track record of growth and expects 2022 full year revenue and Adj. EBITDA of $362M and $85M respectively.
SEE Operational Excellence in its integrated value chain for flexible packaging materials will provide significant productivity and efficiencies to achieve $30M in annualized estimated cost synergy savings by the end of year three (3). This transaction is a new opportunity to leverage SEE’s proprietary M&A playbook to drive acquisitions to successful outcomes, as demonstrated with the recent case of Automated Packaging Systems.
Drives Rapid Geographic Expansion, Automation, and Innovation
Liquibox will benefit from SEE’s geographical reach to drive synergistic growth opportunities. Liquibox filler equipment technology provides an attractive source of growth for SEE Automation™. E-commerce ready solutions for fluids & liquids will benefit from SEE’s integrated approach to digital and the advancement of prismiq™ digital packaging and printing solutions.
Liquibox’s newest innovation, Liquipure® is growing at attractive rates. In 2021, Liquibox launched VINIflow® Bag-in-Box dispensing tap with 26% less plastic to meet sustainability goals and keep products fresh longer. Liquibox solutions and patented technologies are aligned with SEE’s net positive circular ecosystem strategy.
Increases exposure to quick service for attractive end markets
With the acquisition, SEE plans to increase penetration in Food Service and Quick Service Restaurants, where the combined solutions offering will include:
- Cryovac Autopouch™vertical form fill seal and Flex Prep™ automation solutions for back-of-house productivity on condiment and sauces
- Liquibox Bag-in-Box solutions for soda fountains, dairy, urn liners, & to-go packages.
What are the transaction details, financing and approvals?
Purchase price of $1.15B on a cash-free debt-free basis represents an estimated EV/Adj. EBITDA multiple of 13.5x and a multiple of 10x after factoring in only cost synergies. SEE Adj. EPS, exclusive of purchase accounting, will be accretive immediately after close.
SEE has secured $1.0B of committed debt financing with the balance of the consideration to be paid with cash on hand. As of September 30, 2022, SEE had $1.4B of liquidity consisting of $1.1B available under our committed credit facilities and $249M in cash.
Post-transaction expected net-debt leverage of about 3.5x Adj. EBITDA expected to be significantly reduced within 12 to 18 months, benefiting from strong pro-forma free cash flow generation. SEE anticipates corporate family ratings to remain unchanged by Moody’s and S&P.
Subject to the receipt of applicable regulatory approvals & other closing conditions, the transaction is expected to be completed in the first 1/4 of 2023. The Company plans to provide its 2023 outlook on Feb 16 2023, with the acquisition of Liquibox, subject to closing.