French packaging group Albéa and US private equity fund Blackstone Group are in advanced negotiations to take a controlling stake in Essel Propack (EPL), India’s largest specialty packaging company, according to three people aware of the development. Amid consolidation in the packaging industry, the parent group is looking to sell assets in order to reduce debt.
Besides the two contenders cited above, Indorama and private equity fund Carlyle have also submitted nonbinding bids but the discussions with Albéa and Blackstone are believed to be progressing, said one of the persons cited above.
Albéa, a global leader in beauty, personal care, oral care, pharmaceutical and food packaging, is owned by French private equity fund PAI Partners. Due diligence is being conducted before binding bids are submitted. Morgan Stanley is advising the EPL promoters.
ET in its August 9 edition was the first to report the company is up for sale. Led by Ashok Goel, the promoters own 57.19 per cent of the company.
EPL had a market value of Rs 3,381 crore at the Friday close. Buying out the promoters will trigger an open offer for an additional 26 per cent of the company.
EPL, part of the Subhash Chandra-led Essel (Zee) Group, manufactures laminated plastic tubes, extruded laminated plastic tubes, caps and flexible laminates used in packaging of oral care products, cosmetics, food and pharmaceuticals. EPL sells more than 7 billion tubes to over 400 clients globally from 19 global facilities.
“We wish to mention that the company has never commented on transactions by its shareholder(s), and in the absence of verified data available with it considers that such information is speculative,” said Essel Propack chairman and managing director Ashok Goel. “As a policy, the company does not respond to market rumors and speculative news reporting.” He added that the company continues to evaluate various strategic alternatives aimed at enhancing long-term shareholder value, including collaborations.
Carlyle, Blackstone and PAI Partners declined to comment. Albéa, Indorama and Morgan Stanley didn’t respond to queries. Albéa has 38 manufacturing sites globally. Besides India, it has a presence in China and Indonesia. It manufactures tubes and rigid packaging at its Goa and Baddi plants.
Major customers in India include Dabur, Patanjali (oral care); Godrej, Emami, Vicco, Marico (skincare), Sun Pharma, Dr Reddy’s and Piramal (pharmaceuticals), Lakme, Colorbar, Oriflame, Avon, L’Oreal (beauty and cosmetics).
OFFLOADING STAKES
The succession issue is also a trigger for Goel to explore divesting his flagship business, according to people aware of the matter. In the past, he has held informal discussions with PE groups but nothing has fructified so far. In 2015, Essel Propack sold its wholly-owned subsidiary Packaging India (PIPL), valued at Rs 165 crore, to Amcor Flexibles India.
The debt-ridden Essel Group is in the process of selling various assets, including parts of its road and solar portfolio. Subhash Chandra is also looking for a buyer for half his stake in flagship Zee Entertainment Enterprises.
At the group level, Essel has total debt of Rs 17,174 crore. Of this, the infrastructure business accounts for Rs 11,466 crore across three major verticals – power transmission, solar and roads (toll and annuity).
In one of the recent transactions in packaging space, promoters and a PE investor in Manjushree Technopack — India’s largest rigid plastic packaging solution provider— offloaded a majority stake to US PE fund Advent International, valuing the company at Rs 2,300 crore.
Source: Economic Times