ARCA SYSTEMS - FROM TRADITIONAL PLASTICS MANUFACTURER TO INNOVATIVE LOGISTICS PARTNER
Background
Arca Systems is a market leader in products and systems for materials handling. The company improves its customers' logistics chains by providing reusable plastic containers, boxes, pallets and trays. IK acquired a 65 per cent stake in Perstorp Plastic Systems (renamed Arca Systems after the buyout), in 1998, with the former owner Perstorp AB retaining a 30 per cent stake in the company. In connection with Sydsvenska Kemi’s acquisition of Perstorp AB in 2001, IK acquired Perstorp’s remaining 30 per cent stake in Arca Systems.
The Opportunity
IK viewed Arca Systems as an attractive investment opportunity for several reasons. As plastics and returnable packaging is a fast growing segment in the global packaging market, and as the focus is increasing on logistics and environmentally friendly solutions, the company is active in an industry with a solid outlook. Arca Systems held a leading market position and was an innovator in its industry. However, when IK first looked at Perstorp Plastic Systems the profitability had been unsatisfactory for several years and IK saw significant potential to improve Arca Systems' operating performance.
The Outcome
Following the buyout, in cooperation with IK, Arca Systems’ management developed a change programme containing a number of measures to be taken in order to increase the company’s efficiency and raise performance. Actions included the closure of three production sites, reengineering of the remaining nine production facilities and divestitures of non-core activities.
As profitability began to increase to satisfactory levels, growth became the focus. Arca Systems stepped up its efforts in product development in order to commercialise key products in its development pipe-line. As a result Arca Systems, in close cooperation with its customers, developed and launched a number of new and innovative products and systems during IK's ownership period and the company reinforced its transformation from being a manufacturer of boxes to a partner in developing logistics solutions. During IK's ownership, Arca Systems has turned losses into good profitability, despite adverse raw material cost development, and at the same time embarked on an attractive growth path.
In February 2005, IK sold Arca Systems to the Dutch group Schoeller Wavin Systems for approximately €190 million. The combination of Arca Systems and Schoeller Wavin was a perfect fit as the companies are complementary both in terms of products and geography. For IK's investors, the Arca Systems' investment was highly successful, delivering a return of over 3 times the original investment.
