Transpaco still on the hunt to buy companies

Niche packaging group Transpaco has been looking “very aggressively” at acquisitions, including segments of larger and loss-making rival Nampak. But no opportunities have been deemed deal worthy.

Speaking at an AGM on Friday, CEO Phil Abelheim disclosed that Transpaco had looked at 30-40 companies as possible acquisition targets in the past year. “There was not very much that was of interest to us.”

He confirmed Transpaco had looked at three operations that Nampak were looking to sell, but declined to disclose which three.

“One of them we were keen on. But on further investigation not because there was anything wrong with the company we felt that, in our hands, this would not be a suitable acquisition.”

Abelheim said another Nampak company was looked at recently, but it was not a business that Transpaco had expertise in. He added that enthusiasm for acquiring a third Nampak company was tempered by the presence of African operations. “We are not keen to expand into Africa.”

Transpaco has previously made good returns from assets acquired from Nampak. The group bought Nampak Flexibles in 2006, and in 2010 it took over Disaki Cores and Tubes, as well as Cleveland Packaging and Global Packaging (for the princely sum of R30m).

Abelheim indicated that Transpaco had also looked at acquiring a business from another JSE-listed company. “We were very keen ... it was a nice business. But it had challenges, and we walked away.”

With no deals clinched or pending, Abelheim said it made sense for Transpaco to buy back its own shares. “To buy shares at an earnings multiple of five times and below net asset value in a business we understand, is a lot better than buying into an unknown company.”

At the AGM, Opportune Investments CIO Chris Logan noted that over 21 years Transpaco, which still operates from a spartan head office, has managed an average return on equity of 19.3%. “You have not seen your returns fade with age.”

But Logan did note that the past financial year was a tale of two halves, as load-shedding disrupted the second-half trading period.

Abelheim conceded it was tough to cope with higher levels of load-shedding. “At some points at level six load-shedding we were on for two hours and off for two hours. It takes oneand-half hours to warm up an extruder. So, you sometimes have a half-an-hour of production ... which is untenable.”

He said the maintenance bill has also increased markedly. “Every time you restart a machine and every time a machine heats up and cools down, we get the risk of blown motors and drives. The cost of spares is becoming enormous.”

Abelheim did not provide a trading update for the new financial year.