Essel Propack deal: Here’s what Blackstone is getting for Rs 2,157 crore

Financial express
Sushruth Sunder 
April 23, 2019

After PE giant Blackstone snapped up Essel Propack in a Rs 2,157 crore deal, chairman Ashok Goel of the specialty packaging firm said that the sale offers good value. Notably, global investment giant Blackstone announced that it will pick up a 51% stake from Ashok Goel Trust at Rs 134 per share and will eventually do an open offer to acquire an additional 26% stake at Rs 139.19 per share. Based on the open offer subscription, the purchase price is set to be between Rs 2,157 crore and Rs 3,211 crore (or, approximately $310-462 million). The sale is expected to complete in the coming months, subject to customary closing conditions and approvals. We take a look at key synergies from the deal.
Blackstone’s emerging market consumption bet
Investment giant Blackstone is betting on growth in consumption in emerging markets. In an interview to CNBC TV18, Blackstone said that growth from new emerging markets will benefit Essel Propack to a great extent. “Essel Propack is the world’s largest manufacturer of laminated tubes. Our thesis here is to ensure the growth of the company across two vectors– newer end segments, ie, beauty, cosmetics and pharma. The second is emerging markets India, China and Latin America,” Amit Dixit, head Blackstone India told ET Now.
Operational synergies
Blackstone will look to harness operational synergies from the deal, as it has a very strong global network in the consumer sector. “We own other packaging firms as well, so we know the customers if this space really well. The company is already growing at 11% y-o-y in topline, while the sector grows at 1-2%. It’s already a fast growing firm, the question if Blackstone can accelerate the growth,” he said.
Not a distress sale
Blackstone noted that there was no distress promoter sale scenario in the case, and the PE giant was in discussion for many months prior to the deal. “All investments by us are strategic in nature, and there is no scenario of the desperate seller. This process has been going on for some time now. From what we understand the seller also had options,” Blackstone India head Amit Dixit told in an interview to ET Now.
From Essel’s viewpoint

Ashok Goel clarified that the amount raised from the deal will not be used by Zee group promoter Subhash Chandra to pay back lenders, he said to CNBC TV18. He also said that Ashok Goel Trust is not financially or commercially a part of the Essel Group. He added that Blackstone was chosen as it could add value to Essel Propack. Taking stock of the synergies from the deal, Ashok Goel said that he will look to expand Essel World portfolio. Further, he noted that Blackstone is not looking to delist the business.
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