Cardia Bioplastics Limited (ASX: CNN) has signed a terms sheet with privately held Stellar Films Group (Stellar Films) under which a merger of the businesses of the two groups is proposed.
What is the goal?
The idea is to create a leader in sustainable packaging. Under the terms of the proposed merger, Cardia Bioplastics will acquire all of the shares and units issued in Stellar Films and issue ordinary shares in Cardia Bioplastics to the owners of Stellar Films. This will mean that Cardia shareholders will own 42% of the merged group and the owners of Stellar Films will own 58% of the merged group. An Extraordinary General Meeting of Cardia Bioplastics shareholders is expected to be held in early 2015, after an Independent Expert's Report has been circulated to Cardia Bioplastics shareholders. An exclusivity period of four months began on 21 November 2014, while each side does its necessary homework.
How did this come about?
Cardia Bioplastics and Stellar Films originally partnered to produce environmentally friendly, high quality and cost competitive Biohybrid films tailored for the global personal care and hygiene products industry. The Biohybrid film produced with Stellar Films has a unique soft touch and warm feel that is ideal for personal care product applications such as nappies/diapers, feminine or incontinence products.
More importantly, the two companies worked well together. And that cooperation has lasted three years already. Both sides see inherent advantages in the merger, including the scale and geographic footprint of combined operations, market access and reach, production and operational savings, complementary intellectual property positions, resources to deliver business strategy and high quality management teams.
Stellar Films is an Australian privately owned company that manufactures and globally markets high quality cast films to the personal care, hygiene and medical product industries. The company is headquartered in Melbourne and operates manufacturing facilities in Melbourne and Port Klang, Malaysia. Over the last fifteen years, Stellar Films Group with average sales over the last three years of over $21 million, has developed partnerships with customers in over 27 countries throughout North America, Asia, Africa, the Middle East and Australia/New Zealand. In addition, Stellar holds an interest of 50.8% in Akronn Industries. Akronn manufactures silicone-coated paper and film products at its Nilai, Malaysia operation, supplying the global hygiene and medical packaging markets as well as the sustainable energy sector.
Cardia Bioplastics develops, manufactures and markets its patented renewable resource-based materials and finished products, derived from Cardia’s proprietary technology for the global packaging and plastic products industries. The company holds a strong patent portfolio and its growth is fuelled by the global trend towards sustainable packaging. Established in Australia in 2002, the company headquarters and Global Application Development Centre is in Melbourne. Cardia Bioplastics’ Product Development Centre and resins manufacturing plant is in Nanjing, China. Cardia’s manufacturing plants for film and bag products are in Nanjing, China and São Paulo, Brazil with further offices in Australia, China, USA, Brazil and Malaysia, and a network of leading distributors across the Americas, Asia and Europe.
Cardia Bioplastics chairman, Richard Tegoni, commented that the proposed merger, “…will complement and strengthen our Cardia Bioplastics business in its product offering, market position and global reach. The combined business has the scale and resources to deliver the successful implementation of our profitable business growth strategy in our carrier bags, films and packaging, and waste management target market segments.”
