KPS earns over 2x return on packing company exit

New York-based KPS Capital Partners has sold a portfolio company, liquid packaging manufacturer Blue Ridge Holding, the parent company of Blue Ridge Paper Products, to the New Zealand-based Rank Group for $338 million (€ 247 million). With the sale, KPS’s seventh in the past 14 months, the firm has realized over 2x return on its original investment.

KPS created Blue Ridge from a paper mill, an extruding plant and five converting plants that the firm bought from Champion International for $200 million in 1999. The transaction was KPS’s first deal through its first fund, said managing partner David Shapiro. The firm put in place a management team, negotiated a labor contract with the Paper, Allied-Industrial, Chemical and Energy International Union, built infrastructure and information systems, and created a brand identity for the new company.

KPS also changed the focus of Blue Ridge over the years of its ownership, choosing to enhance its high-end print capabilities through strategic acquisitions while shutting down two facilities to reduce Blue Ridge’s presence in the so-called “milk carton business” of lower quality packaging.

During KPS’s ownership, Blue Ridge was also able to negotiate contracts with major vendors including Tropicana, Minute Maid, and Dean Dairy. The private equity firm helped Blue Ridge recover when two hurricanes damaged the company’s facilities in 2004.

“We’ve sort of seen it all with this business,” Shapiro said. “And I think our work has been validated through this purchase.”

KPS makes controlling investments in businesses in the manufacturing, transportation and services industries, with a focus on distressed companies and special situations.

Rank Group is the owner of Australasian forest products company Carter Holt Harvey; Memphis, Tennessee-based beverage packing company Evergreen Packaging; and Swiss food-and-beverage packaging company SIG Holding AG.

Paul, Weiss, Rifkind, Wharton & Garrison was legal advisor to KPS. Houlihan Lokey Howard & Zukin provided a fairness opinion to Blue Ridge.

The acquisition is the latest of several deals in the packaging sector this month: Bahrain-based Investcorp bought a majority interest in Berlin Packaging for an undisclosed amount, and One Equity Partners bought a controlling stake in Dutch packaging business Schoeller Arca Systems from Stirling Square Capital Partners for €428 million.

The deal is also one of the few private equity transactions to enjoy full union support, at a time when one of the US’s largest and most influential unions, the Service Employees International Union, has ramped up its “Behind the Buyouts” private equity campaign to give workers a louder voice in buyout negotiations and a share in the financial rewards. By contrast, KPS and the unions representing Blue Ridge employees – PACE and later the United Steelworkers – worked together during the private equity firm’s ownership.