Essel Propack Buys Out Its German Joint Venture EDG

Speciality packaging and laminated plastic tubes maker Essel Propack Ltd has said on Wednesday that it has acquired the 100 per cent stake in its German joint venture Essel Deutschland Germany (EDG) for an enterprise valuation of $32 million. Following this, EDG will be a wholly owned subsidiary of Essel Propack, which was has been a 25 per cent joint venture partner in EDG until now. The acquisition will help Essel unlock synergies such as enhanced cross selling opportunity in the German markets, sourcing flexibility and better capacity utilization at all of its Europe plants.

The EDG’s current revenue of approximately US $40 million will now be consolidated in Essel’s global revenue and will boost its consolidated revenue by at least 11 per cent. Essel Propack, which is one of the large global players in the laminated plastic tube manufacturing catering to the FMCG and pharmaceutical industries, had posted a consolidated revenue of Rs. 2,184 crore in financial year 2016.

“The acquisition of EDG will further enhance our position in the non-oral care category,” said Ashok Goel, vice-chairman and managing director of Essel Propack in a Wednesday (21 September) statement. “This move is in keeping with our overall plans for achieving revenue growth of 15 per cent and a net profit growth of 20 per cent towards achieving our Mission 20:20:20.”

The Indian company has now embarked on a Mission 20:20:20, which is to achieve operational (EBITDA) margin of 20 per cent, Return on Equity (ROE) at 20 per cent and Return on Capital Employed (ROCE) at 20 per cent within the next 2 years.

With complete acquisition of the joint venture, Essel can now deploy its proven capability to offer high decoration laminated tube solutions for the premium non oral care brands across Europe, including Germany. Essel will also have the benefit of a long term supply agreement which EDG had recently signed with a local oral care company.

According to Ram Ramasamy, Global COO, Essel Propack, the complete buyout will enable the company to step up productivity and efficiencies to those of other Essel Propack plants and improve overall profits.

Part of the $2.4 billion Essel Group, Essel Propack currently has an employee-base at least 2852 people representing 25 different nationalities and it functions through 21 production facilities in eleven countries including the US, Mexico, Colombia, Poland, Germany, Egypt, Russia, China, Philippines and India. It currently sells more than 6 billion tubes to the global pharma and consumer goods companies a year.

“This move (the 100 per cent buyout of the joint venture) will help us to create a strong platform for growth in Europe especially in the non-oral care category. As we have a ready customer base, this will help improve our revenue growth through synergies and it will add 63 per cent to our Europe revenue on an annualized basis,” said Alan Conner, European Business Vice-President of Essel Propack.