Mitsubishi Pencil Co Ltd is acquiring 13.5 per cent stake in public-listed Linc Pen & Plastics Ltd for Rs 20 crore ($4 million) through a preferential allotment. The deal has been struck at more than twice the current market price of Linc Pen.
Linc Pen scrip rose 4.4 per cent to close at Rs 47.55 a share on the BSE in a strong Mumbai market on Tuesday.
As per the deal, Mitsubishi Pencil Co is buying 2 million shares of Linc Pen at Rs 100 a share. Post issue, the Japanese firm will own 13.53 per cent of Linc Pen. This deal values Linc at Rs 148 crore(~$ 29 million). Linc has a current market cap of Rs 60 crore.
For the trailing 12 months period ended December 31, 2011, Linc Pen had revenue of Rs 262 crore with EBITDA of Rs 11.2 crore and net profit of Rs 3 crore. So the deal values the firm at 13.2x trailing 12-months EBITDA and 49x its net profit.
Although Linc has been consistently growing its revenues year on year, the company’s profitability has been affected over the last two years.
Linc Pen & Plastics is a manufacturer, marketer and exporter of writing instruments and stationery products. The company’s headquarter is in Kolkata, with two manufacturing facilities located in West Bengal and one in Goa.
Linc operates under its own mother brand besides marketing products of other brands including Uniball, the flagship brand of Mitsubishi Pencil Co. Linc Pen & Plastics has exclusive rights of distribution, marketing and packaging of ‘uniball’ brand in India. It is also associated with some other brands including Lamy and Bensia.
Mitsubishi Pencil is part of diversified conglomerate Mitsubishi Group. Since, Linc is already a partner for selling its products in India, the equity stake purchase appears to be a strategic investment.
This can also be read as a move to build a direct presence in India where some other global competitors of Mitsubishi have cut marquee deal with well known brands.
Valuations:
Last year, another Japanese firm Kokuyo out majority stake in public listed stationery major Camlin for Rs 360 crore. Camlin is currently valued at Rs 233 crore as against its annualised EBITDA for the current fiscal ending March 31(based on numbers of nine months ended December 31, 2011) of Rs 16.45 crore, giving it a multiple of 14x.
This is comparable to the latest deal struck by Mitsubishi Pencil.
Three years ago, French stationary maker BIC Group had acquired 40 per cent stake in Cello Group for $160 million (Rs 790 crore at that time). The deal valued Cello at a whopping $400 million or around 16x one year old EBITDA of Cello. Cello is the market leader in the pen and other stationery business in the country.
Other big brands in the stationery segment include Reynolds and Luxor.
