Case Studies

We all know corrugated sheetboard from the packaging industry where it is used because it is light but at the same time extremely robust. Today, corrugated sheetboard is one of the most used packaging materials in the world - and a lot of it comes from the South German town Landau, home of Progroup AG, Europe’s largest independent manufacturer of corrugated sheetboard. The group is well positioned with nine production sites and annual sales of around EUR 480 million. It owns two paper mills with an annual output of one million tons of corrugated base paper and seven corrugated sheet feeder plants.

Three new plants within half a year

In July 2008 however, the company was about to take a decisive step towards expansion. The company was planning to build its next two plants in Eisenhüttenstadt as well as Poland, with Eisenhüttenstadt earmarked to be the largest corrugated base paper mill in Germany. On top of that, the company opened its new plant in Great Britain. Jürgen Heindl, founder and CEO of Progroup AG: “We have been recording continuous and steady growth since our company was founded in 1992 thanks to our technological leadership and our unique business model. This provided us with the required finance. But it was the first time even for us that we carried out such a significant expansion within the space of half a year.”

Investor becomes partner to maintain company’s independence

But Progroup AG required capital for implementing this major investment (the paper mill in Eisenhüttenstadt cost EUR 630 million and the plant in Poland EUR 55 million). Involving a financial investor was the obvious solution, especially as financing the project with bank loans alone would have been profoundly restrictive due to the financial crisis and also extremely expensive as risk premiums would have been added during this difficult time. At the same time, the company did not want to impair its independence as a business. The solution was to obtain real equity in form of a capital increase. BWK Unternehmensbeteiligungsgesellschaft from Stuttgart, a specialist in minority interests, was taken on board as a partner. This company sees itself as an “institutional partner for family businesses” and invested EUR 40 million in Progroup. Unlike most private equity firms, BWK, which is currently investing around EUR 0.5 billion in 22 companies, has no fixed exit periods but prefers long-term investments. “Progroup’s business model and also its strong management convinced us,” says Matthias Heining, Managing Director of BWK.

Considerable financial leeway

Jürgen Heindl: “This investment model has been the right decision for us, particularly in the long term. Thanks to the capital increase, we were able to significantly increase our equity ratio and create considerable financial leeway for our company, especially regarding our ambitious expansion strategy.” Progroup has indeed been able to considerably expand its leading position in Europe with the help of this cooperation. Overall, the company will increase its annual output to one million tons and create 230 direct and more than 500 indirect jobs.