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South African packaging company Nampak has entered into an agreement with Clements Nominees in terms of which Nampak will acquire the entire issued share capital of Nigeria-based beverage can manufacturing facility Alucan Packaging from investment holding company Alucan Investments for $301-million.
The acquisition would also see the group securing the shareholder loans made by Clements.
Further, as an integral part of the arrangement, Nampak had been granted an option, valid for a period of ten years, to also acquire the entire issued share capital of a company engaged in rigid plastic packaging in Nigeria, if and when the beneficial owner elected to sell his interest.
Nampak would fund the acquisition through available cash resources and existing debt facilities.
Commenting on its motivation for the acquisition, Nampak stated that beverage can manufacturing was one of its core businesses and one in which it had a strategic competitive advantage. The acquisition supported its aim of growing its revenue footprint in Africa to 35%.
“We have been looking to invest in such a facility in Nigeria for some time and Alucan’s installed capacity, valued at $120-million, includes the preparation and civil engineering for a second line, which has the potential of adding a further 1.1-billion cans a year in this rapidly growing market,” the company noted.
Alucan Packaging manufactures beverage cans for the beer, malt and soft drink industry in Nigeria. It has been operating an eight-colour, two-piece single aluminium beverage can manufacturing line since March.
The manufacturing facility occupied 35 000 m2 on 8.4 ha of land, while its main factory occupied 32 000 m2 and had a current production capacity of 1.1-billion cans a year.
Nampak said the decision to acquire the company at a substantial premium to net asset value was to access the Nigerian market immediately and to gain a first mover advantage in Africa’s second-largest economy.
“We evaluated the greenfields alternative but, based on our experience in setting up other plants on the continent, notably our can manufacturing plant in Angola and our cartons and labels business in Nigeria, this option was not favoured, as it was estimated that it would take us in the region of three to four years to be up and running at a cost of some $160-million.
“In this scenario, early market advantage would have been lost,” the company said in a statement on Monday.
Plastic packaging manufacture was also a core business for Nampak, and the option to acquire a large and established rigid plastic manufacturer in Nigeria would provide an opportunity to further grow the group’s revenue in the rest of Africa.
The acquisition remained subject to various conditions precedent, including approval by the Financial Surveillance Department of the South African Reserve Bank.