Swedish firm acquires GW Plastics for $240 million

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Swedish firm acquires GW Plastics for $240 million

Thu, 08/06/2020 - 1:52pm -- tim

Brenan Riehl at GW Plastics. VBM file photo.

by Timothy McQuiston, Vermont Business Magazine Nolato has signed an agreement to acquire Bethel-based GW Plastics. The company, which was founded in 1955, has annual sales of approximately $216 million (1.8 billion Swedish Krona) and an EBITA margin of around 7 percent. The acquisition price, including contingent consideration, is estimated at approximately $240 million (SEK 2 billion).

GW Plastics ranked 18th on Vermont Business Magazine's Vermont 100 and was the third largest manufacturer with $183 million in 2019. They have 1,100 worldwide employees. The current management team, which is led by Brenan Riehl, will stay on past the closing, which is expected in September.

“We believe Nolato aligns exceptionally well with GW Plastics’ business and culture, and together we’ll offer our customers the same stability, predictability, and engagement they have come to rely on,” said Riehl, GW Plastics President and CEO. “Our customers will now be able to enjoy the support and scale of the entire Nolato Group with its comprehensive product development, engineering services, and extensive global manufacturing network. The combined capabilities and synergies between our companies are second to none and we look forward to leveraging them for our customer’s benefit.”

In an email exchange, Riehl told VBM: "GW has been consistently profitable since the company was purchased by local management in 1983. We have always put the well-being of our employees and customers before short-term profits.

"Our pending acquisition by Nolato is a very good thing for GW. This will enhance the stability of our long term future and success of our company including our employees, customers and commitment to our community.

"We believe Nolato aligns exceptionally well with GW’s business and culture, embracing the same vision, values and commitment to customers and workforce.  This merger will give GW Plastics more scale in the marketplace including growth capital, new business opportunities, financial stability, and opportunities for career development.

"There will be no impact to jobs in any of our locations following the acquisition including Vermont. In fact, we are hiring in Vermont.

"The ownership of GW believed it was always essential for GW to be left in good hands following the inevitable transition of ownership that most privately-held companies must face.  We worked hard to find the right long-term strategic partner for GW to allow us to continue confidently into the future.  I am personally delighted with this outcome and look forward to working with Nolato to ensure a smooth transition to allow us all to share in a brighter future."

Nolato, based in Torekov, Sweden, said in a statement that the acquisition provides significant volumes and a strong position in North America for the Medical Solutions business area, offering additional opportunities for growth and underpinning existing core customer relationships. The acquisition means Nolato has a solid global position on the three key continents of Asia, Europe and North America.

"Acquisitions are, and have long been, an important part of our growth strategy, and we are continually looking to generate shareholder value by identifying high-quality companies that will strategically enhance Nolato's existing business. We have been interested in GW Plastics for some time, and it's really pleasing to be completing this deal," said Nolato President and CEO Christer Wahlquist.

"This acquisition provides us with significant volumes and a strong position on the key North American continent. It supports relationships with existing customers, while also creating additional opportunities for growth and expanding our customer base," Wahlquist said.

GW Plastics was founded in 1955 and has established a position as an industry leader specializing in complex injection-molded thermoplastic and silicone solutions with a significant degree of innovation and a high-tech standardized global manufacturing platform. The company's products are mainly used in medical devices and, to a lesser extent, in vehicle systems. Their headquarters is in Bethel with another Vermont plant in Royalton.

GW Plastics’ seven global manufacturing facilities will join Nolato’s 25+ facilities around the world.

The business has annual sales of approximately SEK 1.8 billion with an EBITA margin of around 7%. The acquisition price, including contingent consideration, is estimated to be approximately SEK 2 billion, around SEK 1.8 billion of which is to be paid upon transfer of ownership.

The acquisition price includes a contingent consideration of up to $48 million (SEK 400 million). Financing for the deal consists of one-third Nolato cash and new credit agreements with maturities of three and five years respectively. Consolidated goodwill of approximately $180 million (SEK 1.5 billion) is estimated from the acquisition.

Wahlquist said during a conference call with reporters Thursday that he hopes to increase the margin over time. He said the lower margin than their own could be do to GW Plastics being a family-owned business. But there is no expectation to quickly increase profitability. 

He also said that the GW Plastics helps fill a gap in its North American business.

He added that this move is based on "market synergies" and not "cost synergies." Wahlquist said the deal was consummated Wednesday night. He said they had been following the progress of GW Plastics for several years.

Nolato shares on the Swedish stock market were up nearly 10 percent in today's trading. Its annual revenues are about $950 million (SEK 7,919 million). Its  EBITA was 11.3%.

Just over four-fifths of GW Plastics business will be reported under the Medical Solutions business area, with an emphasis on surgical equipment, with the remainder mostly in automotive.

GW Plastics, which is headquartered in Bethel, Vermont, has around 1,100 employees at its seven manufacturing plants in the US, Mexico, China and Ireland. The company has been under the same ownership since 1983 and the current management will remain with the business.

The company has a broad base of customers, the largest of which accounts for just over 20% of sales. GW Plastics has strong, longstanding customer relationships with a raft of market leaders across the globe, especially in the pharmaceutical, healthcare and automotive industries.

This year marks GW Plastics’ 65th anniversary, and the company is proud to have grown from humble beginnings in Vermont to a thriving global enterprise operating from three continents. GW Plastics has experienced rapid growth over the past decade, first with the advent of its Liquid Silicone Rubber affiliate GW Silicones, and then with the 2017 purchase of Irish advanced mold-maker Avenue Mould Solutions. All GW Plastics business units will become part of Nolato’s publicly-traded Group.

"GW Plastics is a well-managed, well-invested company that is a great fit with our corporate culture. The business, which has historically demonstrated healthy organic growth, has extensive know-how in engineering and technology. Together with its size and geographic presence, this provides an ideal strategic combination with Nolato and enables significant market synergies over time," said Wahlquist.

Following the requisite US regulatory approvals, the transaction is expected to be completed in September, when the business will be consolidated into the Group, resulting in a marginal boost to Nolato's earnings per share for the current year. The interim report for the third quarter will provide a full acquisition analysis. The acquisition is being funded using own cash funds and new credit agreements.

VBM asked Governor Phil Scott at his Friday press briefing why he thought there had been so many Vermont businesses acquired over just the last few years (Keurig Green Mountain, Bond Auto Parts, Champlain Oil, BioTek Instruments, etc). And also what his reaction was to the the news that GW Plastics was sold.

"It does seem to be the way of the world. I'm not sure it's just isolated to Vermont. I think we're seeing that throughout the country with many businesses being bought out by larger companies and combined. Some of that could be a strategy of reducing competition, but it does seem as though there's always an opportunity for someone else to pickup and go into business to compete," Scott said. 

As for GW Plastics specifically, he said: "My initial reaction is that GW Plastics has been a great partner, a great business here in Vermont. I don't know any of the particulars. I wasn't notified beforehand. But from what I understand the operations will not change, which is good news. They're going to keep the leadership intact and here, and they're not moving away from Vermont. My priority is trying to grow the economy here in Vermont. Keep people employed. They have to do what's right for them, do what's right for their business. It sounds as though this is a solution that will keep the business here in Vermont. So, from that standpoint I'm somewhat satisfied. But look forward to speaking with the new owners once they come aboard."

Nolato is a Swedish group with operations in Europe, Asia and North America. They develop and manufacture products in polymer materials such as plastic, silicone and TPE for leading customers within medical technology, pharmaceuticals, consumer electronics, telecom, automotive, hygiene and other selected industrial sectors. Nolato's shares are listed on Nasdaq Stockholm in the Large Cap segment, where they are included in the Industrials sector.

GW Plastics plant in Bethel.

Source: TOREKOV, Sweden, Aug. 6, 2020 /PRNewswire/ -- Nolato​ www.nolato.com. For more information, visit GW Plastics’ website https://www.gwplastics.com/