Pro-Pac Packaging (PPG) is selling its PB Packaging rigids business to US giant TricorBraun for $56m, saying the deal will enable it to focus on its core business, and allow it to invest in innovation and sustainability.
TricorBraun is the largest distributor of primary packaging in North America. It operates in 75 locations around the world. The deal to buy PB builds on its entry into Australia last September, when it established its footprint in the region with the acquisition of Cormack Packaging.
PB is positioned as a one-stop shop for rigid packaging needs, providing plastic and glass packaging, with customers in the health, industrial, food, and automotive industries.
In its half year results to December 2021, Pro-Pac said its rigids business was operating in the “new Covid-normal”, and “re-basing production levels” from peak Covid-19 demand, and “performing largely in line with expectation”. Revenue for the half year was down 12 per cent at $31.8m, with profit before tax down by 60 per cent, or $1.8m, at $1.2m compared to $3m in same period in the prior year.
The financial markets backed the company's decision to divest the rigids business, with Pro-Pac's share price shooting up by 10 per cent on news of the deal.
Under the sale the current leadership team at PB Packaging will join TricorBraun, and all 140 PB team members will be offered positions with the company. Effective with the closing of the transaction, PB will operate as PB Packaging, a TricorBraun company. The company will continue to operate as a stand-alone business.
“We are excited to grow our business in Australia, offering customers expanded solutions and supply chain options,” said Court Carruthers, president and CEO, TricorBraun. “The PB Packaging team’s dedication to innovation, quality, and exceptional customer service makes it an ideal fit. We are pleased to welcome PB Packaging to the TricorBraun family, and we look forward to investing in its continued growth.”
Tim Welsh, Pro-Pac CEO and managing director, said, “This divestment simplifies Pro-Pac’s operations, allowing us to focus on our core business and use our investment and manufacturing expertise to capitalise on key industry trends including innovation and sustainability. We will use the capital from the sale of the Rigid business to invest in sustainable, profitable growth. This will accelerate the delivery of our strategy and our transformation into a leading player in the circular economy.
“We are delighted that TricorBraun will acquire the Rigid business and that all Rigid team members will be offered positions with TricorBraun. TricorBraun is a natural home for the Rigid business and there are exciting growth opportunities for the Rigid business and its people. This is an excellent outcome for shareholders, Pro-Pac and the Rigid business.”
Andrew Allsop, executive general manager, PB Packaging, who will run the business once the transaction is approved, said: “Over the last 32 years, we’ve solidified our reputation as one of the most respected distributors of packaging materials and services in Australia. We look forward to continuing our service to customers, with TricorBraun’s support, resources, and investments in our growth.”
TricorBraun will acquire Pro-Pac’s Rigid business through Cormack Holdings. The proposed transaction is subject to Foreign Investment Review Board (FIRB) approval, and other customary completion conditions. The parties anticipate these will be satisfied in the ordinary course and completion is expected to occur on or about 30 June.
A transitional services agreement has been entered into to support the transition of the Rigid business and its operations from Pro-Pac to TricorBraun for a period of up to 12 months following completion.
Based on an assumed completion date of 30 June, Pro-Pac confirms that it is on track to meet its guidance for 2H22 and FY22 as set out in its 1H22 results announcement to the ASX on 25 February.
