Blackstone to buy controlling stake in Essel Propack for Rs 3,211 crore

Private equity major Blackstone said on Monday it was making its largest investment in the consumer sector in India by picking up a 51 per cent stake in Essel Propack for up to Rs 3,211 crore ($460 million). Essel Propack is the Indian packaging supplier to Colgate-Palmolive and Olay. It is the largest manufacturer of laminated tubes in the world.
 
Blackstone will buy 51 per cent in the specialty packaging company from promoter Ashok Goel at Rs 134 a share. This will cost Rs 2,157 crore.  The deal will also trigger the mandatory open offer for a 26 per cent stake in the company. Blackstone has set aside Rs 1,054 crore at Rs 139.19 a share for this, said Amit Dixit, senior managing director and head of private equity for Blackstone in India.
 
Ashok Goel, who is chairman and managing director (CMD), holds 57 per cent in the company. Goel will retain a 6 per cent stake after the transaction. He will get an additional Rs 80 crore over five years as transition service fee. Goel said he would partner Blackstone to grow the business.
 

“Among the key factors of this transaction is continuity of the management and the stakeholders. The senior management, including Chief Operating Officer R Ramasamy, will stay after the deal," he said.
 
Goel, the younger brother of media baron Subhash Chandra, said the current transaction had nothing to do with Essel group, whose debt woes prompted a sale of its assets, including a partial sale of stake in Zee Entertainment Enterprises. "We are one family. But we have no cross-holdings whatsoever," he said.
 
In December 2014, Chandra, his immediate family members and the entities controlled by them ceased to be a part of the promoter group of Essel Propack, as part of a modified family arrangement.
 
Goel plans to invest part of the sale proceeds in Essel World, other leisure businesses, and philanthropy. He has been looking for a buyer for Essel Propack since August. The company’s trailing 12-month revenue ended December 31, 2018, stood at Rs 2,642 crore. Along with Blackstone, a number of suitors were in the race including French packaging group Albéa, chemicals major Indorama and private equity investor Carlyle. Names such as Amcor, an Australian packaging company, and Finnish food packaging firm Huhtamäki were also doing the rounds. By early 2019, Albéa and Blackstone were shortlisted for the sale process.
 
On Monday, Essel Propack's stock settled at Rs 132.65 a share at the close of trade on the BSE.
 
This was marginally ahead of its last closing price of Rs 131.45 on Friday.