Blackstone Group LP, the world’s biggest private equity firm, has agreed to acquire a majority stake in Indian packaging company Essel Propack Ltd for as much as Rs 3,211 crore ($460 million).
The PE firm will buy a 51% stake from Essel’s promoters for Rs 2,157 crore and make an open offer to purchase an additional 26% from the public shareholders, the Mumbai-based company said in a stock-exchange filing.
Chairman Ashok Goel-led promoters held a 57.03% stake in Essel Propack as on 31 March and will retain about 6%. Goel will move into an advisory role and will get Rs 80 crore over a five-year period.
Essel Propack is part of the diversified Essel Group, which also operates in media, entertainment, financial services, infrastructure and education sectors. The deal comes at a time when Essel Group, led by Goel’s brother Subhash Chandra, has been under pressure due to high debt and has been looking to sell stakes in several businesses including in Zee Entertainment Enterprises Ltd, the group flagship. Zee Entertainment owns a 1.16% stake in Essel Propack.
Blackstone will pay Rs 134 per share to Essel Propack’s promoters and Rs 139.19 per share to the public shareholders. Shares of Essel Propack gained 0.9% to close at Rs 132.65 apiece on Monday on the BSE, where the benchmark Sensex fell 1.3%.
According to media reports in February, French packaging company Albéa, Indorama and US-based private equity giant The Carlyle Group were also in the fray for Essel Propack.
Amit Dixit, senior managing director and head of private equity in India at Blackstone, said that the PE firm aims to leverage the ongoing industry shift to laminated tubes and Essel Propack’s leadership position in oral care to accelerate growth in fast-growing categories such as beauty, cosmetics and pharmaceuticals.
He also said that Blackstone is familiar with the sector with similar investments in the global markets, including in China-based cosmetics packaging firm Shya Hsin Packaging. “The alignment with our global investment comes from a customer angle. In the space of flexible plastic manufacturing of laminated tubes, Essel Propack will be our only investment globally,” he added.
Dixit said the deal doesn't include any fresh capital commitment to the company. However, it may consider selective acquisition opportunities to strengthen research and development capabilities and for market expansion.
Founded in 1982, Essel Propack makes laminated plastic tubes for consumer goods companies and drugmakers. It has 20 factories in 10 countries, employing 3,158 people. It makes 7 billion tubes annually. For the 12 months through December 2018, the company posted revenue of Rs 2,642 crore, up 10% from the year before.
Essel Propack chairman Goel said that he would use the proceeds from the sale in his group companies such as Essel World, Water Kingdom and Fun Kingdom. Another Goel-owned company that changed hands was ItzCash Card Ltd, which was sold to US-based software firm Ebix Inc. in 2017.
Blackstone has been investing in India since 2005 and has committed to investments over $10 billion in private equity, real estate and other segments. Its recent deals include the acquisition of controlling stakes in Aadhar Housing Finance Ltd in February and auto-component maker Sona BLW Precision Forgings Ltd late last year.
Morgan Stanley acted as the exclusive financial adviser to Goel and his affiliates while PwC, Khaitan & Co and Baker McKenzie acted as advisers. KPMG, Trilegal and Simpson Thacher & Bartlett acted as advisers to Blackstone. JM Financial is managing the open offer.