On paper, Multi-Color Corp.’s latest acquisition doesn’t look like much.
The Cincinnati-based label and packaging company in July acquired the heat transfer label business of International Playing Card & Label Co. for an undisclosed amount. With just a few million in annual sales, the acquisition was barely noteworthy for a company that posted net sales of $100 million last year and is on pace to break $120 million this year.
The acquisition’s real significance lies not so much in its raw sales numbers but in its potential impact on the overall capabilities of Multi-Color, a company that makes labels for lots of well-known consumer products, including Tide, Gatorade, Miracle-Gro plant food and Hershey’s syrup.
A string of acquisitions over the past few years has given Multi- Color a comprehensive lineup of label-making capabilities in a highly fragmented $9 billion industry, said Frank Gerace, president and CEO since 1999.
That industry comprises some 3,000 companies competing in three main segments: pressure-sensitive labels, hot glue labels and specialty labels. The latter includes three areas — in-mold labels, heat transfer; and shrink sleeve — in which Multi-Color has leading positions.
The International purchase gives the company technology to augment another acquisition, Framingham, Mass.-based Dec Tech, that it made in January. Both acquisitions have focused on a heat- transfer process that applies ink directly to the packaging, so that labels appear to be painted on. The North American operations of International are being consolidated with Dec Tech’s in Framingham.
The deal also gives Multi-Color more business in Central and South America, and includes access to International’s manufacturing facilities in Argentina. That means Multi-Color can service South American customers from there, reducing transportation costs, cycle times, and a lot of customs-related red tape.
Gerace avoids talk of grand strategies in favor of his preferred emphasis on execution.
“We do the boring stuff very well, every day,” he said. “We have a very disciplined approach to execution.”
With manufacturing expertise in all the major labeling segments and market-leading positions in the fastest-growing specialty niches, Multi-Color has become a “solutions provider” rather than merely a supplier of labels, said George Nooney, a portfolio manager at the Rader Fund.
“There’s so much technology in labels,” Nooney said. “Customers come to them for technical solutions.”
The New York-based hedge fund has accumulated about 2 percent of Multi-Color’s shares since November 2001, benefiting nicely from a run-up in its stock price from $13-$14 to about $21. If it had bought a couple years earlier, it could have gotten in for less than $5.
One customer for whom Multi-Color has apparently provided lots of solutions is Procter & Gamble. It is, and has been for years, Multi- Color’s largest customer by far, accounting for 36 percent of its $100 million in sales in fiscal 2003. That was down from 41 percent of sales the year before, but up in dollar terms.
In an effort to further diversify its customer base, as well as better serve existing customers’ packaging needs, Multi-Color acquired Cincinnati-based Quick Pak Inc. in May of last year. Quick Pak provides packaging services to consumer products companies, including Victoria’s Secret Beauty and Jergens, that are the primary users of package labels. Holiday gift sets and promotional displays are a big part of Quick Pak’s business.
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At a glance
Multi-Color Corp.
Business: Product labels and packaging services
Sales (latest 12 months): $108 million
Employees: About 500
Headquarters: Downtown Cincinnati
Manufacturing plants: Erlanger, Sharonville, Batavia, Scottsburg, Ind., Troy, Ohio, Las Vegas, Nev., Framingham, Mass.
