Cosmo Films today announced its acquisition of a 76.51 per cent stake in Gujarat Propack Ltd (GPL) at Rs 29.25 per share. The shares represent the entire shareholding of the promoters.
In addition, Cosmo Films will make an open offer for another 20 per cent in GPL from the existing public shareholders at the same price. The total acquisition cost would be around Rs 23 crore.
Cosmo Films has an estimated 15 per cent market share in the domestic biaxially oriented polypropylene (BOPP) segment, while GPL holds a 25 per cent share. The two companies would have a combined turnover of Rs 260 crore.
The offer price of Rs 29.25 per share is at a 116 per cent premium over today's closing price of GPL at Rs 13.50 on the Bombay Stock Exchange (BSE) and is at around a 166 per cent premium over the six-month average price of the scrip on the BSE.
DSP Merrill Lynch was the adviser to Cosmo Films on the deal, while Kotak Mahindra Capital Company was the advisor for GPL managing director Bharat Patel.
Ashok Jaipuria, chairman of Cosmo Films, said, "The acquisition would primarily be funded through internal accruals. A bridge loan of around Rs 3-4 crore could be taken if required. Operational efficiencies from synergies would help to reduce the costs and improve market share."
Patel said, "We have decided to sell our stake as the growth process in the company had come to a standstill.
Moreover, GPL owed around Rs 55 crore to financial institutions."
After posting losses of Rs 8.87 crore in 1999-00, GPL turned around in the last fiscal and posted a net profit of Rs 16 lakh.
VFC and Rohit Paper Mills are two other companies owned by GPL. The company has three manufacturing lines at two plants in Baroda, while Cosmo Films has a film-packaging facility at Aurangabad.
"The acquisition marks a consolidation in the domestic BOPP industry in India. The lower share of CFL in the domestic BOPP market is due to the company's focus on the export market. However, our acquisition would enable us attain a significant domestic market share," said Sushil K Mitta, executive director, CFL.
BOPP films are used in areas such as cigarette overwraps, snack food packaging, lamination of books and magazines and pressure sensitive tapers.
Cosmo Films promoter plans stake hike
The promoter group of Cosmo Films is planning to increase its stake by 10 per cent in the company through the creeping acquisition route when the Securities and Exchange Board of India gives its formal clearance. Currently, the promoters hold 42 per cent in Cosmo Films.
Ashok Jaipuria, chairman of Cosmo Films, said, "We are looking forward at increasing the promoter's holding by 10 per cent through the creeping acquisition route. We are waiting for the Sebi notification on hiking of the creeping limit to 10 per cent." Currently, creeping acquisition is allowed up to 5 per cent only.
The acquisition would be financed internally, Jaipuria added. The Jaipuria-promoted Cosmo Films has an existing capacity to manufacture 23,100 tonne of BOPP films and primarily focuses on exports.