US PE giant Blackstone swallows Essel Propack for `3,211 cr

MUMBAI: American buyout major Blackstone has agreed to acquire a controlling stake in Essel Propack, one of the

largest manufacturers of laminated tubes used mostly by the FMCG and pharma companies, for $462 million or around Rs 3,211 crore.

The two-legged deal involves Blackstone buying 51 percent stake from promoter Ashok Goel Trust, which owns 57 percent in Essel Propack for Rs 2,157 crore or $310 million, apart from an open offer for an additional 26 percent stake Rs 139.19 a share, which will be worth $152 million, taking the total deal consideration to $462 million or Rs 3,211 crore, the companies said.

Goel, who also runs Essel World, the first amusement park in Mumbai, is the younger brother of Subash Chandra, the promoter of the financially troubled Essel group that has an indebtedness of Rs 17,174 crore.

Goel was very vocal to deny any business relationship with his elder brother Subash Chandra's Essel group, which is passing through financial troubles for some time now.

"I have no debt and I am not leveraged," Goel said, adding "as a family we are one, and care about each other. But there is no financial or commercial relationships with each other and there is no cross-holdings whatsoever between the two groups," Goel said.

Giving a breakup of the deal, Amit Dixit, senior managing director and head of private equity at Blackstone India told reporters in a concall Monday evening that "based on the open offer subscription, the purchase price will vary between Rs 2,157 crore and Rs 3,211 crore ($310 million to $462 million)."

The sale expected to be completed in the coming few months, subject to customary closing conditions and approvals.

The private equity fund will pay Rs 134 a share to acquire a 51 percent stake from Ashok Goel Trust, and will launch an open offer for an additional 26 percent at Rs 139.19 a share, Essel Propack said.

Dixit said the discussions were on for months between the two parties.

After the deal, Goel, who is currently the managing director, will retain 6 percent in the company and become an advisor, but the rest of the senior management will continue under the new owner. Besides, Goel will get Rs 16 crore each for the next five years or Rs 80 crore cumulatively as an advisor to the company and Blackstone.

It can be noted that Goel's elder brother Chandra is passing through financial difficulties due to some bets taken on asset-heavy new businesses have gone awry, and is also looking at selling a part of his flagship business to pay lenders and has a consolidated debt of Rs 17,174 crore.

When asked if the proceeds would be utilised to reduce the debt of the group company, he categorically said," Essel Propack, Ashok Goel Trust are not financially, commercially part of the Essel group."