Caxton acquires operations of Amcor Flexibles SA for R90 million

JSE-listed Caxton and CTP Publishers and Printers have agreed to acquire the operations of Amcor Flexibles South Africa for R90 million cash.

It reported on Tuesday that CTP Limited, a wholly-owned subsidiary of the company, had concluded an agreement for the acquisition, as a going concern, of the Amcor Cape Town Bag-in-Box and Pouching operations and the Amcor Port Elizabeth (Gqeberha) operations.

The Amcor group is a global leader in developing and producing responsible packaging solutions and is listed on the New York Stock Exchange.

The proposed transaction is still subject to the approval of the competition authorities.

Caxton Group MD Tim Holden said on Tuesday the proposed acquisition represents an expansion of Caxton and CTP Publishers and Printers’ existing packaging operations and is being acquired for “a fair price”.

Holden said the proposed acquisition will not result in any retrenchments of employees at Amcor Flexibles SA.

Bag-in-a-box: Amcor bags, CTP ‘boxes’

He said the Cape Town operation of Amcor Flexibles SA produces bag-in-a-box bladders that it sells to wine companies and is a complementary, natural fit with the CTP cartons operation in Epping that produces bag-in-a-box cartons for the wine industry.

Holden said CTP has a flexible packaging operation almost adjacent to Amcor’s facility in Ndabeni in Cape Town that currently supplies the raw materials for Amcor’s bag-in-a-box bladder operations “so it’s a perfect fit for us”.

“We supply a lot of Amcor’s existing customers and can provide the full raw materials for the wine bag-in-a-box product, which is a growing market.

“It has grown significantly over the last two years and it continues to grow,” he said.

Holden said the Amcor operation in Port Elizabeth is a profitable standalone business that extrudes film, slits and embossed liners for the automotive tyre industry and has produced consistent results for the past few years.

Rationale

Commenting on the rationale for the proposed transaction, Caxton said the acquisition continues CTP’s strategic intent to entrench its footprint in the South African packaging landscape by expanding on its existing packaging product portfolio.

It said the CTP packaging portfolio has experienced recent pleasing growth and this acquisition, together with increases in wet-glue beer label demand and other innovations in folding cartons, is expected to contribute a substantial increase in CTP’s turnover in the packaging division in the next financial year.

Holden said the group’s packaging business has achieved almost double-digit percentage growth in turnover in recent times and is trending in a similar vein for the second six months of the group’s financial year to end-June.

“When we report our financial results it will add probably another 8% growth to that turnover figure,” he said.

Caxton is continuing to expand its packaging horizons and has increased its shareholding in JSE-listed packaging group Mpact to 34% as a prelude to an intended merger transaction. Caxton is seeking competition approval for this planned merger.

The proposed acquisition of the operations of Amcor Flexibles SA constitutes a large merger, and although subject to approval by the competition authorities, falls below the threshold for categorisation of transactions in terms of the JSE listings requirements, according to Caxton.

“Given that there are no material product overlaps between Amcor’s businesses and CTP, there are unlikely to be any competition impediments to the approval of the transaction,” it said.

Disinvestment?

It appears the sale of Amcor Flexibles SA may be a disinvestment related to the unrest and violence in KwaZulu-Natal and Gauteng last year.

Holden said it would be improper for him to comment on the reasons for Amcor selling its operations in South Africa.

However, Samantha Gouy, communications manager for Amcor Flexibles EMEA, confirmed on Tuesday that the decision was made as part of Amcor’s ongoing portfolio evaluation and with the belief that local ownership will better benefit both sites.

“The transaction is subject to the usual regulatory processes. Until then, it’s business as usual for the operations at the two sites.

“No decision has been made for Amcor’s manufacturing site at Durban at this time,” she said.

The report of the Parliamentary Portfolio Committee on Trade and Industry on its oversight visit to areas and businesses affected by the unrest and violence in KwaZulu-Natal and Gauteng last year highlighted the impact of this unrest on Amcor in South Africa.

The report, dated August 6 2021, said “SA Amcor” bought its factory in KwaZulu-Natal from Nampak six years ago and employs about 390 people mainly from communities surrounding Pinetown.

It referred to other significantly smaller factories in Cape Town, which employ 70 people, and the factor in Gqeberha, which employs 12 people.

“The company was directly affected by the unrest,” said the report.

“As a result of the looting and vandalism, it had lost three delivery trucks, all its equipment, including a printing press it had purchased two months prior to the value of R80 million, and office equipment including laptops, computers, and printers.

“In addition, its building had been totally burnt down.”

Shares in Caxton rose 1.14% on Tuesday to close at R8.89 per share.