Essentra plc (“Essentra” or “the Company”) today announces that its subsidiary, ESNT International Limited, has signed an agreement to acquire the entire Specialist Packaging Division of Clondalkin Group (“Clondalkin SPD”).  The transaction values Clondalkin SPD at approximately US$455m, free of cash, debt, debt-equivalent items and tax assets.  The Clondalkin Group is owned by an affiliate of Warburg Pincus.

The consideration, which is subject to adjustments for net debt and working capital and will be payable on completion of the transaction, will be funded in part by a placing (by way of an accelerated book-build) of up to 23,659,761 new ordinary shares, representing 9.99% of Essentra’s current issued share capital (excluding treasury shares); the balance will be funded from existing facilities.  Completion is subject to customary closing conditions, including clearance from certain competition authorities, which are anticipated to be satisfied in Q1 2015.
Rationale and highlights of the transaction

Clondalkin SPD is a leading global provider of a broad suite of speciality secondary packaging solutions for the pharmaceutical and health & personal care industries, and the acquisition of Clondalkin SPD will transform Essentra’s position in these end-markets.  As a leading player in North America and with strong market positions in Europe, Clondalkin SPD’s range of technologies and capabilities support the high product quality and the versatility to deliver the complex solutions required.

With 24 strategically located facilities in North America and Europe, the acquisition of Clondalkin SPD significantly enhances Essentra’s existing geographic presence in healthcare packaging and, through leveraging the combined footprint of both businesses, will allow the Company to further exploit both existing, and attractive new growth opportunities.  In addition, Clondalkin SPD’s product portfolio of folding carton, product literature and labels is complementary to Essentra’s current packaging and authentication capabilities, thereby broadening the range and innovation offered to customers.

The acquisition of Clondalkin SPD is consistent with Essentra’s strategy of complementing balanced, profitable organic growth with value-adding acquisitions in its targeted end-markets.  Clondalkin SPD is a highly attractive business, with a focus on the growing health and personal care industries and a comprehensive offering of high quality, innovative and mission-critical products to meet the exacting requirements of an international customer base.

For the year ended December 2013, Clondalkin SPD generated revenue of US$428.9m, earnings before interest taxation, depreciation and amortisation (“EBITDA”) of US$55.5m and earnings before interest and taxation (“EBIT”) of US$37.2m; as at 31 December 2013, Clondalkin SPD had gross assets of US$205.9m.  For the year ending 31 December 2014, Clondalkin SPD’s current estimates indicate revenue of US$438m, EBITDA of US$58m and EBIT of US$41m.  The acquisition also includes certain tax assets with a value of approximately US$20m.
The transaction meets the Company’s previously stated acquisition metrics, and is expected to be immediately earnings enhancing.  Cost synergies arising from the transaction, and associated reconfiguration of the wider Group, are anticipated to be at least US$16m in 2016.

Commenting on the transaction, Colin Day, Chief Executive, said:

“The acquisition of Clondalkin SPD is a compelling strategic and complementary fit for Essentra, which transforms our existing geographical capabilities to pharmaceutical and healthcare customers who are increasingly seeking a global partner for their packaging requirements.  In addition, Clondalkin SPD substantially enhances Essentra’s position in the growing personal care and beauty packaging industry.  With an experienced management team and proven track record, this acquisition – being the largest in the Company’s history – underscores Essentra’s commitment to building a leading global provider of essential components and solutions in our targeted market categories.”

Deutsche Bank AG, London Branch is acting as Corporate Broker and sole financial adviser to the Company in respect of the acquisition of Clondalkin SPD, and as lead manager and sole bookrunner in connection with the placing.