IOP Buys 130-Year Old Paper Company

Industrial Opportunity Partners has acquired Wisconsin-based Midwest Recycled and Coated Containerboard Mill LLC (DBA Midwest Paper).

Midwest Paper manufactures and distributes various grades of paper including recycled containerboard (medium and linerboard) for corrugated packaging, recycled bag products, and white paper for book publishing and printing/writing applications.

Midwest Paper looks to be a successful turnaround story. The company was founded in 1889 and is headquartered southwest of Green Bay in Combined Locks, Wisconsin. In 2014, the underperforming paper mill was slated for closing by its owner, French paper company Sequana.

Undeterred, ten members of the mill’s management team formed a new company, Appleton Coated, and acquired the mill. However, profitable operations of the mill continued to be elusive and in September 2017, Appleton Coated’s lender, PNC Bank, sent it into receivership, leading to the mill’s shutdown and the layoff of its 600 employees. In October 2017, the mill was sold to Industrial Assets and Maynard Industries, two industrial auction and liquidation firms. Remarkably, after just 60 days without a buyer for the assets of the mill, the management team of Appleton Coated convinced the liquidators to run the business under a turnaround strategy that focused on brown papers – recycled containerboard for corrugated packaging – and Midwest Paper was born.

Today, the company is profitable with all three of its paper machines (two on brown paper, one on white paper) in operation, and the company has an annual production capacity of 400,000 tons and has rehired more than 320 of its employees.

With the sale to IOP, Dave Mackin, an operating principal of the firm, will assume the position of chairman of Midwest Paper. Mr. Mackin is a member of IOP’s board of operating principals which is comprised of experienced operating executives that work closely with IOP portfolio companies. “We look forward to partnering with the Midwest Paper management team in continuing to enhance the company’s production capabilities with a focus on delivering high levels of customer service and quality,” said Mr. Mackin.

“Midwest Paper’s management team believes IOP’s operations‐focused approach will assist us in optimizing all aspects of our business to support continued growth and better serve our customers,” said Mike Deprey, a vice president at Midwest Paper.

IOP focuses on acquiring middle-market manufacturing and value-added distribution businesses, typically with revenues between $30 million and $400 million. The firm targets businesses with strong product, customer, and market positions and provides both management and operational resources to support sales growth and operational improvements. IOP is headquartered in the Chicago suburb of Evanston.

The buy of Midwest Paper is the fourth platform investment for IOP’s third fund, Industrial Opportunity Partners III LP, which closed in July 2017 with $450 million of committed capital. The three earlier Fund III portfolio companies are Creative Foam (acquired in October 2017), a Fenton, Michigan-based manufacturer of die cut, formed foam, nonwoven, and other components used in the automotive, medical, and wind energy markets; SignResource (acquired in July 2018), a Knoxville, Tennessee-based designer and manufacturer of exterior and interior signage for retail fuel/convenience store chains; Royston (acquired in March 2018), a Jasper, Georgia-based designer, manufacturer and installer of check out and merchandising fixtures and equipment; and United Poly Systems (acquired in June 2019), a Springfield, Missouri-based manufacturer of made-to-order high-density polyethylene (HDPE) pipe.

“We are excited to partner with the Midwest Paper team. We believe that Midwest Paper has a strong position in the market and an excellent reputation with its customers,” said Kyle Hood, a director of IOP.

Senior debt financing for the buy of Midwest Paper was provided by JP Morgan Chase Bank and Chemical Bank with subordinated debt financing provided by Yukon Partners.

© 2020 Private Equity Professional | January 14, 2020

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