2017 Nonwovens Sales: $300 million
Jim Dodge, CFO
Hazleton, PA; McElhatten, PA, Wuxi, China
Spunbond, spunmelt, spunlace
This is the last time First Quality Nonwovens will appear in the top companies report. In May 2018, the company announced that it would be sold to R2G, the majority owner of PFNonwovens (formerly Pegas Nonwovens), a Czech Republic-based manufacturer of spunmelt nonwovens. Analysts put the price tag of the notoriously private, publicly held FQN as high as $500 million. The company’s nonwovens business, with operations in Pennsylvania and Wuxi, China, is thought to use much of its output to feed its private label hygiene business, which includes baby diapers, feminine hygiene items, adult diapers, wipes and pet care products.
Jim Dodge, chief financial officer of First Quality Enterprises, said, “In the past 21 years, we have built First Quality Nonwovens into a global leader in the nonwovens industry through strategic investments, strong product development, and differentiation; with full commitment to our workforce, customers, and our communities in Hazleton, PA, and Wuxi, China. We are very pleased to pass along this legacy to a company which shares our principles and values. While it is extremely difficult to part with our nonwovens division and the fantastic team members that work there, we are pleased that, following the completion of the transaction, they will be part of the R2G family of nonwovens companies with similar core values as the First Quality Group. We are also excited about continuing to work closely with them in the years to come as they continue to supply First Quality with premium nonwoven materials.”
Not much is known about First Quality’s nonwovens operations but most experts agree that the company makes about 100,000 tons of spunbond and spunmelt nonwovens on eight lines at two plants in Pennsylvania. It also operates at least one line in Wuxi, China, which came onstream in 2013. It is believed the First Quality also has spunlace assets in Pennsylvania but it is unclear if they are included in the sale. The division will continue to supply nonwoven materials to First Quality’s hygiene business following the transaction.
According to reports, R2G, a Czech-based private equity fund started in 2016, is eyeing First Quality to expand its profile among its global customers in the disposable hygiene market. PFNonwovens currently operates nine lines at two plants in the Czech Republic, where it has a 10th line under construction, and has one-line operations in South Africa and Egypt. The majority of its sales are conducted within continental Europe and the company has made global expansion a top priority. R2G purchased the company in September 2017.
“We believe strongly in the nonwovens business,” says Michal Smrek, CEO Of R2G. “This transaction will enable us and our group companies to support our global customers across four continents. Post transaction, we will have state-of-the-art production facilities and unrivalled know-how and R&D expertise to ensure that our customers benefit from the premium products we offer and the joint innovation and synergies that this combination will bring.
“When we acquired Pegas (PFNonwovens), we said that this was the first step to building a global platform. This transaction is the second step and we look forward to now investing into our global platform and the people that have made the production companies a success.”
Combining PFNonwovens and First Quality Nonwovens will produce one of the world’s largest suppliers of spunbond and spunmelt nonwovens with lines on four continents. When its upcoming investments in Czech Republic and South America are complete, PFNonwovens will have an annual capacity of 131,000 tons while First Quality can make 97,000 tons in the U.S. as well as 24,000 tons in China. Together the two companies’ annual sales will be in the $550-600 million region. Both companies are major suppliers to the global hygiene industry.
The transaction is expected to be complete in the last quarter of 2018.
First Quality will continue to operate its sizable private label hygiene business, which included the former Covidien/Tyco diaper business purchased by the company in 2008, as well as FemPro, a Canadian brand of feminine hygiene products, which was acquired in 2015, and its heritage businesses in the private label feminine hygiene and adult incontinence businesses.