IVE Group has made its move into fibre-based packaging, signing a binding agreement to acquire 100 per cent of Melbourne-based packaging group JacPak in a $35m deal.
IVE will use the acquisition of the $45m-a-year business as the first step in its strategic plan to build a $150m-a-year folding carton operation, which it wants to achieve within three to five years. It says JacPak itself has the capacity to increase revenues by another $15m a year.
JacPak is a leading Melbourne-based short-run to medium-run length packaging player in the $800m folding cartons segment of the Australian packaging sector. It fits the profile outlined by IVE earlier this year when it signalled its intent to move into the sector.
According to IVE, the $800m folding cartons market makes up a core component of the preferred packaging format for large food and beverage customers, with this segment growing around 10 per cent over the last year.
The agreement is subject to the satisfaction of customary conditions and is scheduled to complete at the end of the month. JacPak will continue to operate as a standalone business, with the combined teams working closely together to grow revenue by cross selling IVE’s broad offering into the existing JacPak customer base.
IVE CEO Matt Aitken said, “Over the last two years we have communicated our strategic intention to enter the short to medium run folding cartons segment of the Australian packaging sector. We are pleased to be acquiring a solid entry point into the sector, through the cornerstone acquisition of a business of the calibre of JacPak – a market leading, profitable, and well-respected business.”
Current owner of JacPak, Ashley Tomlin, who will remain with the business post-completion said, “This marks a significant and positive new chapter for JacPak; a successful thriving operation that we have grown over the past few decades. I have no doubt that the business will continue its innovative customer-centric approach as part of IVE, and I am genuinely excited about the potential and opportunities that lie ahead for staff and customers.”
After investigating certain segments of the Australian packaging sector, IVE considered fibre-based packaging as being complementary to the Group’s existing product and service offering, and consistent with its long-term strategy to continue the diversification of the business into aligned adjacencies. The fragmented structure of this sector also provides an opportunity for IVE to play a leading role in consolidating the sector further, similar to the strategy it has executed in other adjacencies over the last decade.
Based on FY23 revenues of $45m, the acquisition is expected to contribute positively to earnings in FY24. Following the realisation of synergies, the business is expected to deliver EBITDA of around $8.4m and NPAT of around $3m, giving rise to EPS accretion of approximately seven per cent (relative to the mid-point of the Group’s FY24 NPAT guidance). Post the realisation of synergies, this represents a 4.2x multiple on the purchase consideration of $35m (including $4m payable as deferred consideration subject to the achievement of performance hurdles over a 12 month period).
IVE says JacPak currently has available capacity of $15m for potential organic revenue growth. IVE is confident that over the near term this capacity will be utilised through new or expanded customer relationships. Should this capacity be fully utilised, it is expected to deliver a further $3.5m in EBITDA and $2.5m of NPAT.
Inclusive of estimated synergies, and assuming current available capacity is utilised, JacPak would generate revenues of circa $60m, EBITDA of around $11.95m, and NPAT of around $5.5m.
Established in 2004, JacPak offers innovative, high-quality folding carton solutions for fast-moving consumer goods (FMCG), such as those for the food, freezer, dairy, cosmetics, pharmaceutical, and pet care industries. JacPak’s manufacturing site in Keysborough, Victoria, employs 100 staff, and offers a full in-house packaging solution.
The strategic acquisition will continue to expand and diversify IVE’s integrated service offering, which also includes Creative Services, Data-Driven Communications, e-Commerce, Brand Activations, Premiums & Apparel, Print, 3PL, Household Distribution and Integrated Marketing services.
