07 July 2013 Commercial

Carlyle wins chance to take Chesapeake on next steps

The VC company has won an auction to take on Chesapeake as it seeks to grow to next level.

Pharmaceutical packaging is a growth area with Chesapeake in position to exploit this.

Pharmaceutical packaging is a growth area with Chesapeake in position to exploit this.

CHESAPEAKE CORP HAS BEEN SOLD for “north of £400 million” to Carlyle Group by Irving Place Capital and Oktree Capital Management. These investment companies had acquired the packaging business four years ago after its publicly quoted parent company filed for Chapter 11 bankruptcy protection.

In the four years since Chesapeake has been remodelled into a worldwide packaging print group focused on pharmaceuticals, confectionery and premium drinks market with 38 sites across Europe, North America and Asia and generating $540 million in sales.

JORDAN KRUSE, MANAGING DIRECTOR at Oaktree Capital Management, says: “It has been a pleasure to have been a part of helping Chesapeake reshape its capital structure, strategic plan and operations throughout the past four years. We believe the company is now set to continue along a strong growth trajectory, and we wish the company and management team continued success as they enter this next phase.”

The two partners had made clear their plans to exit the business resulting in the appointment of Nicholas Mockett, head of packaging M&A at Moorgate Capital to find a buyer. Packaging is one of the few areas of print that is considered attractive to investors as Mockett explains: “Carlyle's investment in Chesapeake highlights the increasing importance of packaging in consumer marketing and the vital role that packaging plays in highly regulated industries, such as pharmaceuticals, in protecting the end user. 

“THERE HAS BEEN A SEA CHANGE IN this segment in recent months, with Contego Healthcare being acquired by Filtrona (now Essentra) for £160m and the sister company Contego Cartons being acquired by Graphic Packaging of the US.” No price has been disclosed for this deal, which is understood to have attracted the interest of a number of groups, though one report quotes “a person briefed on the deal” to be “north of £400 million”.

The reshaping of Chesapeake has renewed its UK production base through a £45 million investment with most plants having received new presses in the last couple of years, latterly the 17 unit Heidelberg Speedmaster XL106 perfector at its East Kilbride plant for confectionary cartons. Heidelberg has also supplied the UK’s only XL154 to the Gateshead factory, a seven unit twin coater machine, and an XL105; KBA has supplied presses to its pharmaceutical leaflets plants in Tewksbury and Greenford; Komori has installed machines at Leicester, Belfast and Nottingham including most recently GLX40 to Cork with a reverse printing unit to print on both sides of the sheet without turning it. It has also made three acquisitions during this period.

MIKE CHEETHAM, WHO AS CEO HAS LED Chesapeake during the ownership of Irving Place and Oaktree, says: “Carlyle's backing will support our aspirations to build upon our strong investments over the past three years as we further grow and develop our business. This collaboration will allow us to respond effectively to new business opportunities as we look to further align our business with our customers' global requirements.”

In short Chesapeake needs to continue to find acquisition opportunities as its main customers look to single source suppliers to meet global packaging requirements and supply chain management. This perceived opportunity is also driving print management companies to approach pharmaceutical companies.

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Pharmaceutical packaging is a growth area with Chesapeake in position to exploit this.

Pharmaceutical packaging is a growth area with Chesapeake in position to exploit this.