Ashok Goel Trust and its associates currently hold close to 57% stake in firm; Ashok Goel to retain around 6% stake and remain in advisory capacity for 5 years.
Global investment firm Blackstone on Monday said it has committed up to $460 million to purchase a majority stake in speciality packaging company Essel Propack that manufactures laminated plastic tubes catering to the fast-moving consumer goods (FMCG) and pharma space.
Ashok Goel Trust and its associates currently hold close to 57% stake in the firm. Blackstone said it will initially buy 51% from Ashok Goel Trust at `134 per share and will eventually do an open offer to acquire an additional 26% stake at Rs 139.19 per share.
Based on the open offer subscription, the purchase price consideration will vary between approximately $310 million and $462 million. The sale is expected to close in the coming months, subject to customary closing conditions and approvals.
Essel Propack ended Monday’s trading session up 0.91%, at Rs 132.65 per share on the BSE. The announcement by Blackstone came after close of trading hours.
Ashok Goel, who has been associated with Essel Propack as a director since 1984 and is the chairman and managing director, will retain close to 6% stake and will remain in an advisory capacity. Goel will receive about `16 crore per year for a period of five years for the advisory role, he told reporters over a conference call.
Asked whether the deal might be used to reduce the Essel Group debt, Goel said Ashok Goel Trust is not financially or commercially a part of the Essel Group. “If you talk as a family, we are one single family, we are a strong family and we care about each other. But there is no financial or commercial relationship with each other and there is no cross-holding whatsoever,” he said.
Essel Propack, which was founded in 1982, has a considerable market share in the laminated tubes market with 20 facilities across 10 countries. Its clientele includes global brands in the oral care, beauty, cosmetics and pharmaceutical industries.
Amit Dixit, senior managing director and head of private equity in India at Blackstone, told reporters over a conference call that there are strong tailwinds in the laminated tube market and the consumption in emerging markets. “Laminated tubes are taking a large share away from extruded plastic and aluminium tubes. We believe Essel Propack will be a big beneficiary of that in two areas — the growth from newer-end markets and the growth in emerging markets,” he said.
Dixit also indicated that he sees value unlocking in the deal with Essel Propack. “Blackstone is very familiar with the sector. We have made multiple investments over the last two decades globally in the sector. In India, we have a consumer packaging company called SH Kelkar while in China, we have a similar plastic packaging company called ShyaHsin Packaging,” he added.
Morgan Stanley acted as the exclusive financial adviser to the sellers and its affiliates. PWC, Khaitan & Co and Baker McKenzie acted as advisers to the sellers and its affiliates. KPMG, Trilegal and Simpson Thacher & Bartlett acted as advisers to Blackstone.
According to reports, Blackstone has pipped French firm Albea as well as Indorama that had also showed interest in Essel Propack. FE could not independently verify the same.
In 2015, Essel Propack had announced the divestment of its wholly-owned subsidiary, Packaging India to Amcor Flexibles India. The enterprise value of the divested business was `165 crore at the time, according to a release.