The Jarden-Visant Acquisition and the Multi Packaging Solutions IPO: An Appraisal
Two of the most notable transactions in the printing and packaging industries last year were Jarden Corp.’s acquisition of Visant Holding and the issuance of an initial public offering (IPO) by Multi Packaging Solutions. Let’s review these headline-making deals to see what they tell us about valuation trends and growth strategies for market leaders like these.
We think that Jarden’s purchase of Visant is a great example of a printing company converting itself into a marketing services provider. When most people think of Visant, they’re probably thinking of Jostens, its yearbook publishing division. But, Visant is much more than that. It also consists of Scholastic, a provider of class rings and other graduation products; Memory Books, an online design and production service for yearbooks; and a publishing and packaging service division for books, book components and packaging.
But the most striking thing about Visant is that it has greater than 25 percent EBITDA margins on $740 million in sales. Those numbers are mind-boggling—some of the best we’ve ever seen. Jarden purchased Visant for $1.5 billion, representing about 7.5 times EBITDA. That’s a real success story in moving from being a printer to a marketing service provider.
We should also add that Jarden itself was purchased by Newell Rubbermaid for about $15 billion shortly after the announcement of the Visant purchase. Jarden purchases Visant, and then Newell Rubbermaid purchases Jarden: it tells us that there are lots of dollars to spend in the most desirable segments of the M&A market.
To keep it in perspective, though, given Visant’s critical mass and its dominance of the yearbook segment, we might have predicted an even higher multiple than 7.5. But, past experience also tells us that really profitable companies sometimes don’t get super-high multiples precisely because their margins are so strong. There’s a point at which the margins get so high that buyers find it very difficult to improve upon them. That tends to deprive these top performers of the premiums that we usually associate with high EBITDAs in M&As.
Let’s turn to the IPO from Multi Packaging Solutions, a company most of us know well. It’s a large ($1.6 billion) business that provides print, packaging and label solutions to the healthcare, entertainment, consumer, cosmetics and media markets. The company went public on Oct. 22, and frankly, it was a disappointing IPO.
This wasn’t surprising in that 2015 was a disappointing year for the public markets and IPOs in general. But, MPS originally had hoped to sell 18.8 million shares at a price range of $15 to $17 per share. What the selling price ended up being was 16.5 million shares at $13 per share. That might not sound like a big difference. But, instead of raising the hoped-for $320 million, MPS raised about $220 million: a 30 percent to 35 percent discount from what it would have liked to attract.
The good news is that the stock price has gone up to about $16 or $16.5 per share since the offering. MPS also had a good quarterly earnings release in which EBITDA increased by about $16 million on a trailing 12-month basis. MPS currently is trading at a little over 11 times EBITDA, and we expect it to be a strong company in the public markets. Maybe the IPO didn’t immediately get a great response from the analysts. But since the quarterly earnings release, the publicity and the analyst reports have been very good.
In the end, MPS probably made the right decisions about selling the number of shares they did at the price they were targeting. We expect them to continue do well, hopefully with the help of some acquisitions to keep the growth rate strong. There’s also the fact that packaging companies generally have much higher EBITDA dollars than other kinds of printing businesses. That’s why packaging companies tend to be rewarded very favorably by the public markets.
Peter Schaefer, partner at New Direction Partners, is an experienced dealmaker with more than 25 years of investment banking and valuation experience, 20 of which has been focused exclusively on the printing and packaging industries. He has closed more than one hundred transactions in virtually every segment of the printing and packaging industries. In addition, he has performed hundreds of valuations for ESOPs, estate and gift tax planning and strategic planning purposes. Contact him at (610) 230-0635, ext. 701.