SOUTH AFRICA – Ethos Private Equity through its Ethos Fund VI, has agreed to offload its 100% stake in South Africa based paper and packaging business, Neopak Holdings, for an undisclosed sum to Corruseal Group.
Neopak is a world-class business with a focus on manufacturing of high-quality recycled containerboard and related paper products via its paper mill operations in Rosslyn and recycling operations in Amalgam.
The company was first purchased by the Ethos Fund VI in 2015 from Nampak, when it was known as Nampak Corrugated, and currently has annual revenues of about R1.1 billion.
Michael Jensen, Ethos partner said, “Over the last few years the company has been strategically re-positioned to create value.
“The level of unsolicited interest we have seen from potential buyers serves as a strong endorsement of the attractiveness of the business, and what the management team has achieved in the last few years.”
Corruseal’s acquisition of Neopak will broaden its portfolio which currently has over 14 companies operating across recycling, paper, packaging and value-added market segments.
For over 40 years, Corruseal has been a pioneering manufacturer and supplier of packaging in the South African market, with a wide foot print.
Its performance corrugated products, using both virgin and recycled paper, are supplied to the perishable and non-perishable foods and beverages, homecare, automotive, general trade and the agricultural markets.
“The acquisition of Neopak is an important step in Corruseal’s ongoing growth. This is a strategically significant investment for us, and reaffirms our continued confidence in the South African economy and its people.
“We are also very excited about the addition of the Neopak team and the opportunities this presents for shared learning,” Mehul Mehta (Corruseal Joint-CEO) said.
Growth potential for the company
The transaction positions the company to maintain its impressive growth rate in the South African paper and packaging market, which is expected to grow at a compound annual growth rate of around 5% over the next five years.
The recycled paper market is enabled through the efficient collection of wastepaper fibre.
According to RecyclePaperZA, the country’s paper recycling association, South Africa’s recycling efforts have prevented around 19 million tonnes of paper being sent to landfills in the last 15 years.
In 2020, South Africa saw recycling of 1.1 million tonnes of paper and paper packaging. This put the country’s most recent paper recovery rate at 73%, up from 68.5% in 2019.
“The Neopak business has delivered strong improvements in operational and financial performance over the last few years.
“The acquisition by the Corruseal Group will help us to maximise shared benefits for all stakeholders, whilst ensuring the long-term sustainability of our business in a highly competitive industry,” said Hamish Fraser, Neopak CEO).
Rand Merchant Bank, a division of FirstRand Bank Limited, acted as financial adviser and debt funder to Corruseal, while Bowman Gilfillan and Werksmans acted as legal advisers to Corruseal. Webber Wentzel acted as legal adviser to Neopak and Ethos.
Completion of the transaction is subject to certain customary conditions, including regulatory approvals, which are expected to be obtained in the first half of 2022.
The deal comes days after Ardagh Group, global supplier of sustainable, infinitely recyclable, metal and glass packaging for brand owners, agreed to acquire Consol Holdings Proprietary Limited, the leading producer of glass packaging on the African continent, for an equity value of ZAR10.1 billion (US$635 million).
The transaction is expected to be finalized in the second quarter of 2022.
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