Amcor, Huhtamaki in talks to acquire Essel Propack2 min read . Updated: 24 Sep 2018, 11:31 PM IST
Essel's promoter group led by Ashok Goel, the younger brother of founder Subhash Chandra, has mandated Morgan Stanley to manage the Essel Propack sale
Mumbai: Promoters of Essel Propack Ltd, which is part of the $4.2 billion Essel Group, are in preliminary talks to sell a controlling stake in the company, said two people directly aware of the development, requesting anonymity. “The talks are at an early stage with two foreign packaging companies, including Amcor Ltd and Huhtamaki Oyj, but more suitors are likely to join the talks," said the first person.
According to the people cited above, the promoter group led by Ashok Goel, the younger brother of Essel group founder Subhash Chandra, has mandated Morgan Stanley to manage the transaction. “Apart from the aforesaid suitors, Morgan Stanley has also reached out to other potential suitors, which include private equity funds and strategic bidders," the first person added.
Founded in 1982, Essel Propack is the largest specialty packaging manufacturer of laminated plastic tubes catering to the fast-moving consumer goods and pharma sectors. The company has 20 manufacturing facilities across 11 countries, including the US, Mexico, Colombia, Poland, Germany, the UK, Egypt, Russia, China, Philippines and India. It caters to diverse categories such as beauty and cosmetics, pharma and health, food, oral and home, and offers customized solutions in materials, technology and processes.
The promoters hold a 57.19 % stake in Essel Propack. The company’s current market capitalization is ₹ 3,426.41 crore and any change in majority shareholding, will trigger a mandatory open offer. Its FY17 turnover was at over $368 million.
Headquartered in Espoo, Finland, Huhtamaki is a global food packaging manufacturer. It offers disposable tableware, besides flexible packaging and labels for food and drink, pet food, pharmaceuticals, household and hygiene brands.
Amcor is an Australian packaging company, which manufactures flexible packaging, rigid containers, specialty carton closures and services for food, beverage, pharmaceutical, medical-device, home and personal-care.
“The promoters of Essel Propack feel that business growth in the laminated tubes segment will be only in single digits in the foreseeable future and they feel this is an opportune time for them to derive the maximum value, as the company already controls close to 70% of the global market share," said the first person.
In 2015, Essel Propack had sold its entire stake in its flexible packaging subsidiary Packaging India Pvt. Ltd to Amcor Flexibles India Pvt. Ltd, a wholly-owned subsidiary of Amcor, for an enterprise value of ₹ 165 crore.
“The promoters are seeking a 30% premium to the current market price of the company," said the second person.
Request for comment to Essel Propack and Morgan Stanley did not elicit any response till publication of this story. A Huhtamaki spokesperson declined to comment. An Amcor spokesperson said: “We do not comment on rumors or speculations."
According to market research firm Euromonitor International, India—along with China and Indonesia—remains one of the key growth markets for the packaging industry with demand driven by a young population and high consumption.
Euromonitor said that global growth of the sector is being shaped by emerging market demand and an increased purchase of packaged goods, driven by the populous Asia Pacific region.