At least one private equity group is betting on the future of nonwovens. Last month Polymer Group, Inc. (PGI), one of the world’s leading producers of nonwovens, entered into a definitive agreement to be acquired by private equity funds affiliated with The Blackstone Group. PGI is a global supplier to leading consumer and industrial product manufacturers. The company operates 14 manufacturing and converting facilities in nine countries throughout the world.
The transaction is expected to close prior to the end of the first quarter of 2011.
How will PGI’s new relationship with Blackstone impact its operations? Nonwovens Industry sat down with Jason Giordano, a principal in Blackstone’s Private Equity Group, to find out the answer to this and other burning questions.
Nonwovens Industry: How will Blackstone’s acquisition affect PGI’s strategic direction going forward?
Mr. Giordano: In terms of the company’s strategic direction, it will be to continue doing what the management team has been focused on in the past. Our investment is predicated on partnering with a talented and well-respected management team to support the growth of the business and to offer our proprietary capabilities, expertise and capital. We are hopeful that our portfolio of resources and our substantial capital will help the company continue to expand and really accelerate its growth trajectory.
Nonwovens Industry: Are there any specific areas that will be strengthened or expanded?
Mr. Giordano: One of the reasons we’ve been intrigued by PGI is its strong position globally with leading market share positions in disposable applications, like hygiene and medical. We would like to continue to fill in that global footprint. One thing that attracted us to the space was the substantial growth in many of the company’s end market applications, particularly in emerging markets. We would look very carefully as to how to best support the company in growing along with the market in those developing regions.
Nonwovens Industry: Will PGI’s name change after the acquisition?
Mr. Giordano: No, it’s not our philosophy to change the name.
Nonwovens Industry: Will there be any layoffs or any personnel additions as a result of the acquisition?
Mr. Giordano: No, it’s not our plan to have any substantial restructuring of the management team. In terms of building additional capabilities, we’ll have to evaluate that as we take control of the company. Our strategy with the company is to build the company’s presence globally, so I certainly expect us to be investing behind the company versus trying to curtail investment.
Nonwovens Industry: Are there any specific geographic areas that you feel are interesting at this time?
Mr. Giordano: I wouldn’t narrow it down to specific areas. Certainly the emerging markets are appealing, but in terms of which of those markets will be a higher priority than another, that is something we need to evaluate with the company on a case-by-case basis.
While we think there are great opportunities in those growing markets, there are also opportunities to continue to fill in white space in the company’s existing markets. One of the things that really makes PGI unique is that it is one of the few players that truly has capabilities globally. We think that’s a differentiating, very positive factor for the company, especially when servicing large global customers. To be able to offer that global solution is an attractive quality, so we would like to continue to build out our footprint.
Nonwovens Industry: Why do you feel that this is a good time for Blackstone to get involved with a nonwovens company?
Mr. Giordano: First, we really like the end market dynamics. We see an attractive growing market with relatively stable, recession resistant demand. Across the globe, there are various levels of uncertainty as to the overall macroeconomic situation, but the end markets that PGI serves are pretty stable. For instance, consumers will buy diapers for their babies in good or bad times. Additionally, the use of nonwovens should continue to grow well in the future, especially in developing markets.
Second, our hope when we look for investment opportunities is that there are places where we can add value as an owner and continue to grow the business.
In this instance, we saw a number of opportunities. We have significant capital and hope to invest behind the business,
for example through attractive capacity expansion projects and development of new technology. In addition, we have a global footprint at Blackstone with offices and relationships across
the globe, including deep relationships in Asia, Europe, Latin America and India, as well as here in the U.S. We believe these relationships can help support the company’s growth in these regions.
Nonwovens Industry: Is there a specific place you want to do that with regard to expansion of lines?
Mr. Giordano: PGI is currently building a new line in the U.S. and a new line in Asia. We are very supportive of these expansion opportunities. We think they are very attractive projects. The construction and ramp up of these new lines will occur throughout 2010 and 2011 and will occupy the focus of the company in the near term. In the longer-term, we hope there will be similar opportunities to further expand our capabilities.
Nonwovens Industry: Has there been any restructuring of corporate titles and personnel?
Mr. Giordano: While we haven’t closed on the transaction yet, our strategy is to back the talented, existing management team.
Commenting on the acquisition, PGI's chief executive officer, Veronica (Ronee) M. Hagen, stated, "The sale to Blackstone is the culmination of our strategic review process and we believe that this transaction represents the best value alternative available to our stockholders. Blackstone is committed to supporting our strategy of continued growth and investment in proprietary capabilities in our markets around the globe. The leadership team and all of the employees of PGI are excited to begin the next chapter at PGI and to maintain our position as a global industry leader."
Chinh Chu, a senior managing director of Blackstone, added, "Polymer Group is an attractive company because of its leading position in the nonwovens industry and its strong footprint in high growth developing markets. The Company has a talented management team, which we believe has much to achieve with our support and financial resources."