Blackstone acquires Essel Propack unit
Private equity giant Blackstone is acquiring Essel Propack (EPL), the speciality packaging firm led by Subhash Chandra’s younger brother Ashok Goel, for about Rs 3,200 crore.
Blackstone will first acquire a 51 per cent stake from the Ashok Goel Trust, which currently holds around 57 per cent of the firm, at a price of Rs 134 per share. As the transaction will trigger Sebi’s Takeover Code, Blackstone will come out with an open offer to buy an additional 26 per cent shares.
The open offer price has also been fixed at Rs 139 apiece. Based on the open offer subscription, the purchase price consideration will vary between Rs 2,157 crore and Rs 3,211 crore ($310 million-$462 million).
While Ashok Goel will retain a minority stake in the company, the sale is expected to be completed in the coming months, subject to customary closing conditions and approvals.
EPL, founded in 1982, is a global player in laminated tubes. Through its 20 facilities across 10 countries, it manufactures seven billion tubes annually. Its clientele includes global brands in oral care, beauty, cosmetics and pharmaceutical industries. It posted revenues of Rs 2,642 crore during the 12-month period ended December 31, 2018.
According to the open offer document, upon closing of the underlying transaction, Ashok Goel will step down from the board of EPL and cease to have any executive role. However, as and when requested, he has agreed to be available to “ensure a smooth transition given his experience and industry knowledge”.
As part of this arrangement, subject to the receipt of necessary approvals, EPL will enter into an agreement with Goel or any of his affiliates following which he will provide transition support services for a period of five years after the closing of the transaction.
In consideration of this support, EPL will pay an amount of Rs 16 crore annually to Goel for a period of five years. This cumulative payment of Rs 80 crore, which translates to a per equity value of Rs 5.19 per share, was also considered while arriving at the open offer price of Rs 139 per share. This open offer price represents a premium of around 4.78 per cent to the closing price of the EPL scrip on Monday.
“Leveraging the ongoing industry shift to laminated tubes and EPL’s leadership position in oral care, our plan is to accelerate growth in fast-growing end categories such as beauty, cosmetics and pharmaceuticals,” Amit Dixit, senior managing director and head of private equity in India at Blackstone, said.