Tuesday morning, key executives of Glatfelter held a special conference call with investors to discuss a deal to purchase Concert Industries, one of the world's largest makers of airlaid nonwovens, for a reported $235 million. Calling the acquisition a "significant step forward in the long history of our company," executives said that Concert is a natural fit for Glatfelter, a maker of specialty papers including wetlaid nonwovens.
"We believe that Concert Industries is a natural fit with the Glatfelter family of companies as well as an excellent example of the kind of growth catalyst we want to add to our portfolio," said chairman and CEO George Glatfelter. "This acquisition combines the strengths of two highly specialized companies that operate in adjacent markets."
With operations in Gatineau, Quebec, Canada and Falkenhagen, Germany, Concert's estimated annual sales are $203 million and its earnings are approximately $25 million. In the fourth quarter of 2009, Concert began ramping up a third European airlaid line, representing a $70 million investment, in Falkenhagen, which will add 18,000 tons of capacity per year and bring Concert's global output to 84,000 tons. Approximately 80% of Concert's output currently serves the global feminine hygiene market, which is growing at 5% per year. Other key markets include adult incontinence, food pads, cosmetic pads, tabletop applications and specialty wipes.
According to senior vice president and CFO John Jancunski, Glatfelter is financing the purchase through a combination of cash on hand, new debt and its existing revolving credit facility. No issues with the financing of the deal, expected to close by the end of the first quarter, are anticipated.
Also attracting Glatfelter to Concert was its rank as a preferred supplier among many of the world's largest consumer products companies, the fact that a significant percentage of its output is already contracted through 2013 and some 80% of its current revenue is attached to raw material price pass-throughs, which allow the company to raise and lower prices depending on its supplier costs.
Combining Concert's successful airlaid business with Glatfelter's existing capabilities fits with the company's long-term business plan.
"You have heard me say many times over the years that our vision is to become the global supplier of choice of engineered products and specialty products," Mr. Glatfelter continued. "I firmly believe that the acquisition of Concert Industries brings us closer to realizing that vision than any time in our history.
Glatfelter plans to operate Concert as a third business unit, which will represent approximately 15% of its total revenues. Glatfelter's other two business units are specialty papers and composite fibers. Already present in the nonwovens industry, Glatfelter makes wetlaid filtration media for food and beverage applications, which executives said strongly complement Concert's airlaid technology. "Airlaid technology, although relatively new, is technology that Glatfelter understands," said Mr. Glatfelter.
Founded in 1993 in Canada, Concert Industries was purchased, out of bankruptcy, by Brookfield Special Situations Management Limited, an affiliate of Brookfield Asset Management Inc., in 2004. Since then, Brookfield has returned Concert to health through a series of steps including strengthening relationships with customers and investing in technical improvements as well as the closure of underperforming lines in North America and a lessened reliance on underperforming businesses such as the consumer wipes market.
Moving forward, Glatfelter executives said a disciplined approach to investment as well as a renewed focus on new product development will help the newly acquired business to continue the growth path it has been on since 2004. Specifically, Glatfelter's core competencies in new product development will help diversify the company's airlaid offerings.
"We know how to operate a highly diversified line of products, and we know how to develop new products and bring them to market quickly," Mr. Glatfelter asserted.