By NST Business
SHAH ALAM: Scientex Bhd has set its eyes on becoming a regional powerhouse in flexible plastic packaging market with the acquisition of Klang Hock Plastic Industries Sdn Bhd (KHPI) for RM190 million.
KHPI is a leading manufacturer of custom films and has a diverse customer base of over 450 multinational corporations worldwide, spanning mainly across the food and beverage and fast moving consumer goods sectors.
Scientex, via wholly-owned Scientex Packaging Film Sdn Bhd, today signed a sales and purchase agreement to buy all the shares in KHPI.
With this deal, Scientex, a global packaging manufacturer and leading property developer, has set its pace to become a regional powerhouse in the flexible plastic packaging (FPP) market.
"With the acquisition of KHPI, our manufacturing segment will see a leapfrog in revenue to exceed RM2.0 billion per year.
"This will not only strengthen our position in the global FPP market, but also immediately expand our capacity, product portfolio, and clientele reach. Additionally, we see vast opportunities for the enlarged entity to enjoy synergistic benefits from operational efficiency as well as product innovation initiatives," Scientex managing director Lim Peng Jin said in a statement.
The RM190 million puts the acquisition at an enterprise value (EV) over EBITDA (EV/EBITDA) of 8.44 times.
The deal comes with a profit guarantee of RM18 million profit before tax for the 12-month period to March 31, 2019.
"With the new production facilities, we aim to enhance our services and provide prompt and timely delivery to our global customers through our enlarged operations in multiple locations. Overall, these would certainly sharpen our competitive edge, as we propel Scientex to be a regional leader in the FPP market,” Lim said.
KHPI operates two manufacturing plants in Klang, Selangor, with an annual capacity of 99,000 tonnes and sales of close to RM400 million per annum, compared to Scientex’s manufacturing revenue of RM1.7 billion.
The acquisition of KHPI would boost Scientex's total annual output capacity by 30 per cent to 455,000 tonnes from 356,000 tonnes currently.
According to industry statistics, the FPP market in Asia Pacific is estimated to reach US$45.3 billion by 2019, making it the second largest FPP market in the world after the Eurozone.
The global FPP market is projected to grow from USD151.1 billion in 2014 to USD192.2 billion by 2019 with a compounded annual growth rate of 4.9 per cent.
This acquisition is not subjected to approvals from shareholders of Scientex and is estimated to be completed in the second quarter of 2018.