eResearch | This week, Good Natured Products Inc. (TSXV: GDNP), formally Solegear, announced the acquisition of Canadian-based Shepherd Thermoforming & Packaging Inc., a staple name in the plastics industry, for C$9.5 million.
The acquisition will support Good Natured in increasing its production capacity, expanding its proprietary mold offerings, and improving its customized solutions for package designs. Good Natured will also incorporate Shepherd’s management team and employees into its business.
Good Natured will pay C$8.5 million of the acquisition in cash, while the remaining C$1 million will be paid through a Vendor Take Back Note with a 42-54-month term.
The majority of the acquisition value comes from Shepherd’s real estate, which is valued at C$9 million, and due to the quickly appreciating nature of the property, a future earn-out payment of C$2.3 million is applicable if the real estate value is higher than $9.5 million after 38 to 60 months post-closing of the deal.
According to Good Natured’s most recent conference call, the acquisition will increase its production capacity in Eastern Canada and the U.S., immediately adding a projected C$5.5 million dollars of annualized revenue to its business.
Shepherd Thermoforming & Packaging Inc.
Shepherd has 35 years of experience developing packaging for its 35 to 75 diverse customers ranging from industries including technology, pharmaceuticals, and consumer goods.
Shepherd brings six thermoforming machines, two CNC machines, and various proprietary molds, in addition to a 42,000 square foot manufacturing facility, capable of in-house design, prototype, and production of customized packaging solutions.
In the past three years, Shepherd reported average annual revenues of C$5.5 million and average annual adjusted EBITDA of C$420,000.
Good Natured
Good Natured is a plant-based bioplastics company headquartered in Vancouver, Canada, with over 135 plant-based food packaging designs, servicing over 200 customers across 48 states and provinces.
Good Natured is able to scale production at low costs because their supply chain is outsourced to a network of companies that collaborates with them in developing customized and cost-effective bioplastic products.
In addition, the Company invests in internal process optimization through software solutions, such as its outbound freight and fulfillment system, which decreases costs as the business scales.
Bioplastics Industry
The bioplastic industry is quickly growing with support from both the U.S. and Canadian regulators who are putting pressure on companies to reduce petroleum-based plastic packaging, forcing plastic utilizing companies to change suppliers to renewable and sustainable solutions.
According to Allied Market Research, the global bioplastics industry was valued at US$21 billion in 2017 and is expected to grow to US$68 billion by 2024, growing at a CAGR of 18.8%.
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