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19 April 2010
Following on its commendable growth in the interim period to December 2009, JSE-listed Transpaco today announced its acquisition of Disaki Cores and Tubes (“Disaki”) from Nampak Products (“Nampak”) for around R30 million in line with its stated expansion and diversification strategy (“the acquisition”). Disaki’s range of products complements current production in Transpaco’s Cores division, while at the same time extending the product range into new markets and expanding the group’s geographical footprint.
The purchase price will be settled in four instalments across successive months, and will include not only Disaki but two of Nampak’s other similar businesses - Cleveland Packaging and Global Packaging – which will form part of Disaki by the time the acquisition is concluded. The acquisition remains subject to regulatory and Transpaco board approvals and a satisfactory due diligence of Disaki.
Transpaco CEO Phillip Abelheim says the acquisition will be financed from the group’s available resources, adding that it will present significant opportunities for growth and offer benefits derived from economies of scale. “The acquisition will therefore be value-enhancing for shareholders.” He points out that the pro forma earnings figures reflect only Disaki’s historical performance prior to acquisition, with no bearing on its future performance as part of the Transpaco group.
“Disaki manufactures and distributes paper cores and tubes that augment Transpaco’s existing range of products, but in addition is involved in cones, dividers, dufaylite, paper slitting and yarn carriers which represent a diversification of revenue streams for our Cores division. In addition Disaki’s manufacturing and distribution footprint across the Western Cape and KwaZulu-Natal extends Transpaco’s national presence and goes further towards entrenching the group as a leading national manufacturer, recycler and distributor of packaging products.”
Abelheim says also that the acquisition will further enhance production capacity, enabling Transpaco to meet growing demand.
Transpaco’s interim earnings per share and headline earnings per share were up 18% year-on-year, the latter to 124,6 cents. The group successfully countered a 4,4% decline in turnover (due to a drop in the global pricing of plastics raw materials) by improving efficiencies. Transpaco also reduced its interest payments by almost R6 million using its healthy cash flows, which together with the strong bottom line slashed gearing to 6% from 53%.
Although Transpaco is one of the leading JSE packaging groups with a distinctive performance track record amongst its peers, Abelheim highlights that the counter trades at a price:earnings multiple of 5.5 - “which at well below the sector average makes Transpaco a highly attractive investment opportunity”.
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