In all-cash deal of Rs 63.5 crore
Mumbai, Aug. 30
Essel Propack is acquiring CavinKare group company - Packaging India Private Ltd (PIPL) - for Rs 63.5 crore in an all cash deal.
Announcing the acquisition, Mr Ashok Goel, Vice-Chairman & Managing Director, Essel Propack, said, "India is fast emerging as a hub for packaging material for pharmaceutical and food processing companies. This combined with the retail boom is accelerating the demand for packaging material. Through this acquisition we expect to leverage the emerging opportunities.'' Through its latest acquisition, Essel Propack expects to expand its product portfolio and combine the synergies between the companies to move up the value chain.
Mr. R. Chandrasekhar, COO, Essel Propack, said, "Packaging India and Essel Propack have many similarities in approach to business, knowledge, market reputation and the desire to grow. The acquisition will complement the technologies that we already offer.''
Funding the acquisition through internal acquisitions, the packaging major expects to scale up its operations in the global market where it has already set up greenfield projects in Poland and the US. Estimating the specialty packaging industry at Rs 25,000 crore with a compounded annual growth rate (CAGR) of 15 per cent, the laminated tubes major is open to acquisitions in future.
Financial advisors, Bellwether Capital and Deloitte Haskins & Sells, did the due diligence.
The Essel Propack scrip closed at Rs 77.90 today, up 1.17 per cent against Tuesday's closing of Rs 77.
`Conflict of interest'
Business Linein Chennai, Mr C.K. Ranganathan, Chairman, CavinKare Pvt Ltd, said the sale was necessitated because of a conflict of interest between CavinKare's personal products business and the packaging business. He said that Packaging India was doing a lot of packaging for multinational clients, who chose to move out their business if there was a conflict with CavinKare's own brands in shampoos and fairness creams.
CavinKare itself, he said, sourced at least 30 per cent of its packaging needs for its brands from other suppliers.
Mr Ranganathan explained that while CavinKare's brands were growing rapidly, their growth could not be held ransom by who Packaging India's clients were.
Asked if he was looking to deploy the funds raised from the sale in brand acquisition, he said that the company was indeed looking at regional food brands to acquire.
"We are discussing some options," he said, while adding that there were not many brands available for sale in personal care products.