April/May 2015

April/May 2015


Sale of companies causes jitters … but it’s good news

THE industry has been the scene of some big transactions of late, with the biggest being the sale of Nampak’s Flexibles business to Amcor, the Aussie-global packaging group.

That deal is valued at between R250 and R300-million, depending on clauses in the sale agreement. Not far behind that is the purchase by Transpaco of East Rand Plastics from Astrapak group in a transaction of R77-million. Transpaco also purchased the land in Brakpan where ERP has operated for over five decades, for an additional amount.

Astrapak has featured prominently in the ‘For Sale’ area lately, with sales of Cinqpet in Johannesburg and the remaining Hilfort operations in Bloemfontein and Upington going to Boxmore group. Investec-backed Boxmore has been snapping up converting operations at a rate of knots, and appears set on becoming the preeminent PET preform and container maker in the region.

This amount of activity is all quite scary for most people in the industry, not least because most employers have a preference for stability and predictability. But should we be nervous? In the Nampak Flexibles sale, the selling price was below that of the estimated value of the business, by a whopping R76-million in fact. But Nampak was eager to exit the very competitive flexibles area and rather focus on higher margin activities, particularly in Africa. That is something that most businesses would not find even vaguely attractive, but sometimes such radical measures are necessary in order to achieve long-term goals.

The plus is that Nampak found a buyer for a business it wanted to sell, and the same applies to all the other sales. The fact that buyers are being found for these operations is hence good news. In this regard, few topics have generated as much interest in our market as the dismantling of the Astrapak group. Most are shocked to see the number of Astra businesses which have been sold, and we presumably have not heard the end of the tale, but the plus is that buyers are coming forward and in many cases it appears the operations will continue.

At the same time, spare a thought for some of the individuals caught in the crossfire of these exchanges. We know even of owners of healthy businesses who have accepted purchase offers … and found themselves high and dry not too long afterwards. That’s a scary experience, but it’s important to watch this process and observe the potential pitfalls: the guys around the country who are responsible for the management of their companies just cannot afford to fail.

We report in this issue about some of these transactions, and the activity is bound to provide lots to talk about in the taverns in the evenings. Most of the companies changing hands are involved in the plastics packaging sector, so it’s a relief that capacity is not being lost: a healthy plastic packaging sector is at the core of the future of the South African economy.

Strong USA may be good news

The just completed American NPE show was a big success, with visitor numbers up nearly 20%, and we all know that the greenback has been hammering just about all currencies, which suggests the USA economy is showing strength, a lot of strength actually. Rather than intimidate us, we should try to follow the winning example and lift our standards and efficiencies to keep up.

Martin Wells