No Slide Title

Piper Jaffray Middle Market Mergers & Acquisitions The Wrap: August 2004

The Wrap is a monthly newsletter published by the Middle Market Mergers & Acquisitions Group at Piper Jaffray. Topics related to the current M&A packaging industry are highlighted in each month’s issue.

To subscribe/unsubscribe, please visit www.piperjaffray.com/thewrap. SPOTLIGHT ON CORRUGATED CONTAINERS (PART I)

In the latest Piper Jaffray packaging industry article, we provide an overview of the corrugated container market including industry Corrugated Container Market Growth characteristics, end markets and major participants. In addition, we review mergers and acquisitions value drivers, transaction activity, and $25,000 425 performance and valuation metrics. The domestic corrugated containers market is a $22 billion segment of the overall packaging industry. 400 $23,000

Selected highlights of the corrugated container market are summarized B illio below. Next month we will review M&A activity and public company 375 s n n performance in the corrugated container market. $21,000 S q illio 350 u a M r

Industry Characteristics e

$19,000 F in $ The following characterize the current state of the corrugated container 325 e e industry: (i) highly competitive market, (ii) consolidating market, (iii) t $17,000 cyclical and competitive demand drivers, (iv) high value-added 300 opportunities and (v) continued M&A activity. $15,000 275 Growth Drivers 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Factors affecting the level of growth in the corrugated container market Value of Corrugated Shipments Box Shipments include: (i) the state of the economy, (ii) offshore competition and (iii) competing products. After three years of declining sales, we expect the Source: Fibre Box Association corrugated container industry to benefit from the rebound in the economy. Corrugated container demand has been affected both by the U.S. Corrugated Container Market Share movement of manufacturing offshore (e.g., to China) and increased Weyerhaeuser offshore corrugated container capacity. Corrugated containers have 19% All Others experienced some competition from products such as stretch and shrink 21% wrap, reusable plastic containers and intermediate bulk containers.

Competitive Landscape The corrugated container industry consists of a few large vertically integrated producers and many smaller independent companies. The six PCA 7% largest “integrated” producers have nearly 80% market share in both Smurfit-Stone corrugated containers and containerboard. Private equity firms active in 19% the segment include: Madison Dearborn (Packaging Corporation of International Paper America and Jefferson Smurfit), Northwest Capital (Port Townsend 9% Paper), Code Hennessey & Simmons (Tharco Containers) and TransOcean Capital (Stronghaven). Georgia-Pacific Temple Inland 12% These topics are discussed in greater detail in our August 2004 report 13% entitled Corrugated Containers: A Mergers and Acquisitions Review. To Note: Market share data for International Paper does not reflect the receive a copy of this report, please contact Doug Lawson at company’s recent acquisition of Box USA [email protected] or 312 920-2139. Source: Weyerhaeuser

PACKAGING INDUSTRY M&A CONTACTS

Doug Lawson Chad Bell Andrew Schwartz Vice President Associate Analyst 312 920-2139 312 920-2149 312 775-3273 [email protected] [email protected] [email protected]

Since 1895. Member SIPC and NYSE. Securities products and services are offered in the United Kingdom through Piper Jaffray Ltd., which is authorized and regulated by the Financial Services Authority.

ACQUIRER FOCUS: SMURFIT-STONE CONTAINER CORPORATION

In each issue Piper Jaffray highlights an active acquirer in the packaging industry. LTM Sales: $7.8 billion Gross Margin: 12.3% EBITDA-CapEx Margin: 5.8% LTM EBIT: $208 million EBIT Margin: 2.7% Total Net Debt: $4.9 billion LTM EBITDA: $626 million EBITDA Margin: 8.0% Total Net Debt/EBITDA: 7.8x

Profile Key Statistics

Headquarters: Chicago, Illinois Product Segments Ownership: Public–NYSE: SSCC Containerboard Description: Smurfit-Stone is the world’s largest manufacturer of and Corrugated paperboard and paper-based packaging. Containers 74% Products: Smurfit-Stone’s Containerboard and Corrugated Containers division (74% of total company sales) manufactures corrugated containers, containerboard, kraft paper, solid bleached sulfate, market pulp and other specialty products. Consumer Packaging 22% Acquisition History Other Source: Company filings 4% Smurfit-Stone has made numerous acquisitions over the years Historical Sales

Date Target Name Target Sales USD in millions Business Description ($ million) $8,500 Jun-03 Arko Paper Products Co. Inc. $27 Mnfr folding cartons Sep-02 MeadWestvaco Corp. - Stevenson mill / related assets $247 $8,113 Corrugating medium mill $8,000 Aug-02 Packaging Services Group $23 $7,837 Corrugated and solid fiber boxes $7,691 $7,722 Dec-01 AT Plastics, Inc. - Packaging business NA Mnfr specialty, industrial flexible plastic packaging $7,483 $7,500 $7,423 Jun-01 Corporation Durango SA de CV - Bag packaging operations NA Mnfr bag packaging May-00 St. Laurent Paperboard $987 Mnfr linerboard, foodboard, corrugated sheets $7,000 Nov-98 Stone Container Corp. $5,051 Mnfr containerboard, corrugated containers, multiwall bags 1999 2000 2001 2002 2003 LTM 6/30/04 Source: Company filings Two-Year Stock Price Graph 25,000 $25

Market Capitalization: $4.4 billion 20,000 $20 ) St Enterprise Value: $9.3 billion s 0 o

0 15,000 $15 c 0 k (

EV/Revenue: 1.2x Pr me i EV/EBIT: 44.8x c lu 10,000 $10 e o

EV/EBITDA: 14.9x V EV/EBITDA─CapEx: 20.8x 5,000 $5

0 $0 8/02/02 11/15/02 2/28/03 6/13/03 9/26/03 1/09/04 4/23/04 8/06/04 Date Since 1895. Member SIPC and NYSE. Securities products and services are offered in the United Kingdom through Piper Jaffray Ltd., which is authorized and regulated by the Financial Services Authority.

SELECT JULY TRANSACTIONS

In each issue Piper Jaffray highlights recent transactions in the packaging industry.

Owens-Illinois announced that it has entered into a Pfingsten Partners has acquired Convergent Pharmacy definitive agreement with Graham Packaging Company to from Convergent Label Technology. The company will sell its blow-molded plastic container operations for $1.2 now operate under the name Rx Label. Convergent billion. The deal is expected to close in the fourth quarter Pharmacy manufactures pressure sensitive prescription, pending regulatory approval. Graham Packaging is owned thermal roll, and pin feed labels, catering to grocery chains, by the Blackstone Group. mass merchandisers, independent pharmacies and hospitals.

Captive Plastics, a leading manufacturer of plastic bottles AEA Investors has agreed to acquire Kranson Industries and closures, was acquired by First Atlantic Capital. First from Code Hennessy & Simmons in a deal valued at Atlantic plans continued investment in the business and approximately $350 million. Kranson is a distributor of strategic acquisitions. Captive offers a wide range of fully container packaging components, including plastic and integrated, rigid plastic packaging products marketed to the glass bottles, pails, dispensers and related closures. personal care, food, spirits and health care segments.

CCL Industries Inc. has sold a label factory, CCL Label London’s Candover Investments agreed to acquire UCB Winnipeg, to Color Ad Label for $5.3 million. CCL Label Films for $398 million. UCB Films, a subsidiary of designs and prints pressure-sensitive, self-adhesive labels Belgium’s UCB Group, manufactures cellophane and and promotional products for the packaging, promotional, polypropylene films for packaging applications as well as and pharmaceutical industries. bottles for sports drinks.

Keystone Capital announced it has acquired Vista Nova Communications announced it has agreed to International Packaging, a subsidiary of Hormel Foods acquire Mid-Cities Paper Box. Mid-Cities Paper Box offers Corp., in a management buyout transaction. Vista is a paper packaging and printing services to the publishing leading provider of artificial casings and film packaging and printing as well as industrial and personal service products to a variety of specialty and broad-line food paper industries. customers.

Enterprise Date Value Enterprise Value/ Announced Acquirer Name Target Name Target Business Description ($ mil) Sales EBIT EBITDA 7/28/2004 Graham Packaging Co Inc Owens-Illinois Blow-Molded Plastic Mnfr blow-molded plastics $1,200.0 1.1x 6.5x Operation

7/22/2004 First Atlantic Capital Ltd Captive Plastics Inc Mnfr blow-molded plastic bottles and $100.0 1.0x closures

7/19/2004 Candover Investments UCB Films Mnfr cellophane and polypropylene $398.0 0.9x films as well as bottles

7/14/2004 Nova Communications Ltd Mid-Cities Paper Box Inc Mnfr paper packaging products

7/12/2004 Pfingsten Partners Convergent Pharmacy Mnfr pressure sensitive prescription, thermal roll, and pin feed labels

7/6/2004 AEA Investors Inc Kranson Industries Inc Mnfr glass,plastic containers $350.0 0.9x

7/2/2004 Color Ad Label CCL Industries Inc-Label Mnfr Mnfr specialty packaging labels $5.3 0.7x Operation

7/2/2004 Keystone Capital Inc Vista Intl Packaging Co Mnfr film packaging products

7/2/2004 Visypet (NZ) Ltd Visy-PET Manufacturing Assets PET manufacturing assets

Since 1895. Member SIPC and NYSE. Securities products and services are offered in the United Kingdom through Piper Jaffray Ltd., which is authorized and regulated by the Financial Services Authority.

PIPER JAFFRAY M&A INSIGHTS

Packaging-focused Reports Past Issues of The Wrap The following reports focus on important M&A issues in the Recent topics examined and acquirers highlighted in The Wrap include: packaging industry: Date Spotlight Acquirer – Corrugated Containers: A Mergers and Acquisitions Review Jul 04 Public Valuation and Pricing Clondalkin Group – Mergers and Acquisitions in the Packaging Industry–2003 Year Jun 04 Pkg Purchase Agreements Pactiv in Review and 2004 Outlook May 04 Molded Fiber Packaging Georgia-Pacific – Mergers and Acquisitions Value Drivers for Companies in the Apr 04 Acquisition Trends (II) Weyerhaeuser Packaging Industry Mar 04 Acquisition Trends (I) Nashua – Packaging Industry Valuation Considerations: Capital Feb 04 Value Drivers (II) Multicolor Expenditures Jan 04 Value Drivers (I) SCA North America – Caps and Closures: A Mergers and Acquisitions Review Dec 03 End Market Performance Mason Wells – Valuations in the Packaging Industry Nov 03 Capital Expenditures (II) JPMorgan Partners – Mergers and Acquisitions in the Packaging Industry–2002 Year Oct 03 Relative Enterprise Value International Paper in Review Sept 03 Leverage Statistics Bemis – Packaging Industry Public Company Acquirers–Earnings Per Aug 03 Capital Expenditures (I) Rexam Share Accretion/Dilution Considerations Jul 03 Raw Materials Code Hennessy & Simmons – Plastics Industry Jun 03 Caps and Closures Ball May 03 Leveraged Buyouts in Pkg. Rock-Tenn Apr 03 Valuations in the Pkg. Industry Berry Plastics

No password is required—visit our Web site www.piperjaffray.com/ma.

The following disclosures apply to stocks mentioned in this publication if and as indicated: (#) Piper Jaffray was making a market in the Company’s securities at the time of this publication. Piper Jaffray will buy and sell the Company’s securities on a principal basis. (@) Within the past 12 months, Piper Jaffray was a managing underwriter of an offering of, or dealer manager of a tender offer for, the Company’s securities or the securities of an affiliate. (~) A Piper Jaffray analyst who follows this Company, a member of the analyst’s household, a Piper Jaffray officer, director, or other Piper Jaffray employee is a director and/or officer of the Company.

Information contained in this publication is based on data obtained from sources we deem to be reliable, however, it is not guaranteed as to accuracy and does not purport to be complete. Nothing contained in this publication is intended to be a recommendation of a specific security or company nor is any of the information contained herein intended to constitute an analysis of any company or security reasonably sufficient to form the basis for any investment decision. Nothing contained in this publication constitutes an offer to buy or sell or the solicitation of an offer to buy or sell any security. Officers or employees of affiliates of Piper Jaffray & Co., or members of their families, may have a beneficial interest in the securities of a specific company mentioned in this publication and may purchase or sell such securities in the open market or otherwise.

Notice to customers in the United Kingdom: This publication is a communication made in the United Kingdom by Piper Jaffray & Co. to market counterparties or intermediate customers and is exclusively directed at such persons; it is not directed at private customers and any investment or services to which the communication may relate will not be available to private customers. In the United Kingdom, no persons other than a market counterparty or an intermediate customer should read or rely on any of the information in this communication.

Additional information is available upon request. www.piperjaffray.com

Since 1895. Member SIPC and NYSE. Securities products and services are offered in the United Kingdom through Piper Jaffray Ltd., which is authorized and regulated by the Financial Services Authority.