Transaction:
- Jindal Poly Films Limited (JPFL) announced that it has signed an agreement for the sale of a minority stake in its packaging films business to Brookfield Asset Management, which, through its Special Investments program (BSI), and together with institutional partners (collectively Brookfield), has agreed to make a Rs.2,000 crore investment in the company.
- The transaction will result in JPFL carving out its packaging films business (PFB), which generates approximately 85% of its total revenue, into a wholly owned subsidiary in which BSI will hold a minority stake.
- JPFL will continue to own its non-woven business unit and other corporate assets. It will retain 75% ownership of the new unit, to be called JPFL Films Pvt. Ltd.
- Brookfield SPV has agreed to acquire 20 (twenty) equity shares of JPFL Films and subscribe to 19,990 compulsory convertible preference shares (CCPS) of JPFL Films (on preferential basis).
- The structured equity investment in JPFL consists of CCPS and equity shares of the new subsidiary, giving BSI a 25% stake and downside protection through a ratcheted equity structure tied to financial performance.
Jindal Poly Films Limited:
- Jindal Poly Films Limited (JPFL) is a part of the B.C. Jindal group. It is engaged in the production and sale of packaging films. It includes flexible plastic films and non-woven fabrics products.
- Company has an integrated plant in Nashik, Maharashtra.
- The products are used in packaging for food and cosmetics, labels, tapes, and various other industrial segments. It also provides non-woven fabrics which find application in hygiene, baby diapers and other medical applications.
Brookfield Asset Management Inc.:
- Brookfield Asset Management is a Canadian asset management firm focused on property, renewable energy, infrastructure, and private equity.
- It has over US$690 billion of assets under management (including through affiliate Oaktree Capital Management). Brookfield has been operating in India for over 11 years and currently manages $21 billion in assets.
Rationale:
- Transaction will help Jindal Poly Films to finance future growth and expansion of the business by partnering with a reputed PE fund.
- Along with enhancing profitability and growth possibilities for its packaging business unit, JPFL will be able to accelerate its diversification into new companies as a result of this investment.
- JPFL commented that they are proud to enter a strategic partnership with a large global investor such as Brookfield. JPFL will have access to Brookfield’s global network for revenue optimizations, operation improvements and global best practices.
- Globally PE players have been active in packaging sector in last two years. In India also large deals in this sector include Blackstone acquiring Piramal glass and Essel propack, JM Financial investing in Canpac, Advent investing in Manjushree Technopack etc.
- The share price of Jindal Poly Films went up by 6.31% in one day following the acquisition announcement.
Acknowledgements:
RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
Disclaimer:
This material has been prepared by the personnel in Vora Corporate Finance which is Investment Banking arm of Vora Management Consultancy Private Limited and looks after Mergers & Acquisitions (M&A), Private Equity (PE), Fund Raising, Debt syndication and Valuations and is based out of Ahmedabad, Gujarat, India. Any views or opinions expressed herein are solely that of individual authors and may differ from view of Vora Management Consultancy Private Limited. This material is proprietary to Vora Management Consultancy Private Limited and is for your personal use only. Any distribution, copy, reprints or forward to others is strictly prohibited.
This material captures the information based on information available in the public domain, public announcements and sources believed to be reliable. Analysis contained herein is based on publicly available information and appropriate assumptions. This material is intended merely to highlight market developments and is not intended to be comprehensive and does not constitute strategic, investment, legal or tax advice. In no event Vora Management Consultancy Private Limited be liable for any use by any party or for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you for evaluating any transaction.
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