Buying out financially stressed firms in the developed world is not just limited to the big boys of India Inc. Mid sized firms are also dipping into the market to bottom fish. Mumbai-based Ess Dee Aluminium that acquired loss making India Foils from the Vedanta group last year, is in advanced talks to buy Italy’s packaging company Comital for $125-150 million as per an ET report.

Comital is majority owned by Borsa Italiana (the Milan stock exchange)-listed investment group Management & Capitali. Comital group had revenues of $403 million (~ Rs 2,000 crore) for the year ended December’08, almost five times that of Ess Dee Aluminium. Bank of America Merrill Lynch is one of the investment bankers involved in the transaction.

Ess Dee Aluminium which came up with an IPO around 3 years back is 60% owned by its chairman and managing director Sudip Dutta. It clocked 43% jump in net sales of Rs 401 crore with net profit of Rs 66 crore for the year ended March’09. But at a consolidated level after factoring in loss making India Foils (which became a subsidiary in November’08) its consolidated revenues for the year stood at Rs 451 crore with net loss of Rs 24 crore.A possible deal may involve a chunk of debt. Ess Dee has a market cap of around Rs 890 crore and had reserves of Rs 282 crore as of March’09.

If the deal goes through, it would be the second acquisition for Ess Dee Aluminium in as many years. Last year it acquired India Foils from Vedanta group which doubled its domestic production capacity to around 37,000 tonnes per annum.


The acquisition will give Ess Dee a significant presence in Europe. A little less than two thirds of overall revenues for Comital comes out of Italian market with rest of Europe accounting for another third. It has limited exposure outside of European continent.

Besides global expansion Comital would also build exposure in consumer packaging business for Ess Dee Aluminium. Traditionally, Ess Dee has derived a large part of its revenues from pharmaceuticals industry with global clients such as Glaxo, Pfizer, Novartis among others. The proposed acquisition of Comital would give it a firm footing in the consumer products packaging business in which it has a relatively small presence.

Comital has a large consumer business under its own brands including Cuki and Domopak for products such as food wraps for storage and food containers. The home products division of Comital accounts for 60% of the overall revenues of the company.

Besides home products, Comital is also into aluminium sheets, flexible packaging and metallic yarns which are used in various sectors such as pharmaceuticals, food packaging, construction, clothing and industrial applications.

On the flip side, for Ess Dee, the deal would bring additional risks. Ess Dee’s domestic business is largely dependent on demand growth in FMCG and pharmaceuticals, two sectors which have been less affected by the economic slowdown. The proposed deal with Comital will make it overdependent on the European market which has been severely affected by the global economic slowdown.


Management & Capitali’s exit from Comital could be part of its restructuring plans after the Italian packaging company reported 60% drop in earnings for the first quarter ended March’09 due to severe slowdown in the aluminium division.

Aluminium business’ revenues almost halved to € 27.8 million with operating loss of € 1 million as compared with operating profit of € 2.2 million in the same quarter last year. The home products or consumer packaging business was relatively less affected with revenues declining 13% to € 51.7 million and operating profit of € 4 million.

Comital’s management has already initiated a three year business restructuring programme (2009-11) which involves downsizing the aluminium division and focusing on the home products or consumer packaging business. As of March 31, 2009, Comital had net financial debt of € 235.3 million. It is not clear how would the debt would be taken care of in the transaction with Ess Dee.

Poor financials from Comital has also impacted the earnings of Management & Capitali which clocked net loss of € 3.9 million in the first quarter of 2009 from a net profit of € 6.3 million in same period last year. Over the last few months, one of the large shareholders of Management & Capitali has received multiple offers for a stake buyout.

The investment fund had acquired majority stake in Comital in 2006 through a rights issue where it brought in € 44.5 million and Efibanca S.p.A. chipped in with € 19.5 million. Before this transaction the fund had acquired the Valetto family’s holding in Comital for just € 2.9 million. Post the transactions Management & Capitali got 68% stake with Efibanca S.p.A. holding around 30%.


Ess Dee Aluminium has been on the lookout for inorganic expansion. It was earlier also in the race along with rival Indian packaging firm Essel Propack to buy a stake in multi-billion dollar aluminium giant Alcan’s packaging unit which was up for sale.

Rio Tinto which merged Alcan with itself in 2007 has been looking to sell Alcan Packaging and early this month sold the American food packaging unit to US firm Bemis in a $1.2 billion deal. The US operations accounted for a quarter of Alcan Packaging’s global revenues.

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