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Multi-Color Corporation Announces Agreement to Acquire Constantia Labels Division to Create a Global Leader in the Labels Space

Multi-Color Corporation ("Multi-Color") (NASDAQ: LABL) announces today that it has signed a definitive agreement to acquire the Labels Division of Constantia Flexibles ("Constantia Labels") from Constantia Flexibles GmbH ("Constantia Flexibles") for approximately $1.3 billion (?1.15 billion), payable in cash and stock.

The combined annual revenues and EBITDA of the two businesses will be approximately $1.6 billion and $300 million, respectively. The combination brings together Constantia Labels' high performing Food and Beverage business with Multi-Color's strong Wine and Spirit, and Home and Personal Care platforms, and emerging global position in Healthcare. Additional growth opportunities for Multi-Color exist in Home and Personal Care by utilizing Constantia Labels' European operational footprint and assets. Growth opportunities for Constantia Labels exist in Food & Beverage and derive from Multi-Color's US operational footprint and assets. The stronger combined footprint in Asia will provide further revenue opportunities.

The strengthened global platform creates a much greater acquisition pipeline and higher potential synergies from future acquisitions, especially in Food and Beverage, the largest segment of the global labels market.

"The acquisition of Constantia Labels marks a major milestone in the evolution of Multi-Color," said Nigel Vinecombe, Executive Chairman of Multi-Color. "We are bringing together complementary talents in markets and geographies, diversifying our business and creating a global leader with a transaction that is financially attractive, which will better help us serve our customers" he added.

Management estimates the pre-synergy forward EBITDA multiple for acquiring Constantia Labels is approximately 10.25x. The forward EBITDA multiple including pro forma run-rate synergies is estimated to be 9.2x. Management expects the transaction to be meaningfully accretive to Core EPS in the Fiscal Year ending March 2019, the first full-year of combined results, and supports Multi-Color's total shareholder return objective to exceed 20% compounded annual growth over the next five years.

Cost synergies are anticipated to reach $15 million (or 2% of acquired revenues) by Fiscal Year March 2020 through a combination of procurement, SG&A, and manufacturing efficiencies. As an example, Multi-Color will utilize Constantia Labels' pressure sensitive substrate manufacturing capability in the US and Europe to drive future efficiencies. Both companies currently generate EBITDA margins of approximately 18%.

As part of the transaction, Mike Henry, current EVP and Head of Constantia Labels, is expected to become CEO-elect of Multi-Color Corporation, and Constantia Flexibles will become a 16.6% shareholder in Multi-Color. Henry (51), brings 17 years of experience in the labels sector, having started his career at KPMG as a Chartered Accountant, spent 14 years in senior management roles for Spear Labels (based in Cincinnati), and has led Constantia Labels for the past three years. Current Multi-Color CEO, Vadis Rodato, is expected to retire in early 2018 after a transition period. Nigel Vinecombe will remain Executive Chairman.

"I welcome Mike Henry to the executive team and representatives from Constantia Flexibles to the Board of Directors of Multi-Color" Vinecombe added.

"I am delighted to take on this new opportunity and, together with an outstanding team of employees, build on the strengths of the combined businesses to drive forward Multi-Color to further success in the global labels industry," said Henry.

The transaction purchase price is approximately $1.3 billion (?1.15 billion), and will be settled in cash and 3.4 million shares in Multi-Color stock (representing 19.9% of current stock outstanding). Multi-Color's stock will be issued to Constantia Flexibles at a price of $75 per share. Two representatives of Constantia Flexibles will join Multi-Color's Board of Directors, and the shares issued as consideration will be subject to customary lock-up provisions.

Debt financing for the transaction is fully committed through new facilities underwritten by Bank of America Merrill Lynch and Citigroup. Pro Forma leverage for the transaction will approximate 5x net debt to EBITDA, and Multi-Color expects the estimated $100 million of annual free cash flow to delever to a preferred long-term range of less than 4x net debt to EBITDA.

The transaction is expected to close in the third fiscal quarter of 2018, and is subject to customary closing conditions.

Multi-Color was advised by Rothschild as financial advisor, and Keating Muething & Klekamp PLL as lead legal advisor, with Freshfields Bruckhaus Deringer also providing legal counsel to Multi-Color.

Core EPS guidance for Fiscal Year 2018 reconfirmed

Management reaffirms its Core EPS guidance for Fiscal Year 2018 of $4.00. For the Fiscal Quarter ended June 30, 2017, management forecasts approximately $0.80 Core EPS as a result of one off production inefficiencies in one large plant primarily caused by timing of onboarding new and redesigned work before additional capacity and capability could be installed.