Blackstone buys majority stake in Essel Propack, triggers open offer

What's the deal?

Blackstone has entered into an agreement with Ashok Goel Trust to purchase a majority stake (51%) in Essel Propack Limited (EPL) at a purchase price of Rs. 134 per share. The trust and its affiliates currently hold ~57% of EPL. As per SEBI regulations, this transaction will trigger a mandatory open offer for a purchase of additional 26% shares of the company; which has been fixed at Rs. 139.19 per share. Based on the open offer subscription, the purchase price consideration will vary between Rs. 2,157 crore and INR 3,211 crore. 

Ashok Goel will hold a minority stake of ~6% in the company. He would continue to be associated with the company as an advisor for the next five years. Morgan Stanley was the exclusive financial adviser to Goel. KPMG, Trilegal and Simpson Thacher& Bartlett acted as advisors to Blackstone.The deal is expected to complete in the coming months, subject to customary closing conditions and approvals.

EPL background...

EPL is a leading global specialty packaging company and the largest worldwide manufacturer of laminated tubes. It produces 7 billion tubes from 20 global facilities annually. It also manufactures extruded laminated plastic tubes, caps & closures and flexible laminates used in packaging of oral care products, cosmetics, food and pharmaceuticals. Company's clientele includes marquee global brands in the oral care, beauty, cosmetics and pharmaceutical industries.

What’s in it for Blackstone?

The ongoing shift toward laminated packaging from rigid/aluminum packaging by customers in pharmaceuticals, beauty and cosmetics is expected to drive growth of laminated packaging companies globally. EPL is uniquely positioned to capture this structural transition in the packaging industry. Blackstone will help EPL tap customers in cosmetics and beauty segment in Europe, Latin America and China from its investee companies. 

Blackstone will also provide access to its global network of experts in order to streamline the manufacturing process. With access to Blackstone’s capital, EPL can go for an accelerated expansion and acquisition. In line with the play on consumption theme, Blackrock acquired couple of Indian firms in the past and this move will increase their footprint globally with an Indian brand.

No commercial impact on Zee promoter group companies

Blackstone noted that there was no distress promoter sale in this case and that it was in discussion for many months before the actual deal. They reiterated that there is no scenario of the desperate seller and in this case, EPL also had multiple options. Essel management has clarified that the amount raised from this deal will not be used by Zee group promoter Subhash Chandra to pay back lenders. They confirmed that Ashok Goel Trust is not financially or commercially part of the Essel Group and Blackstone is not looking to delist the business from exchanges.

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