Ethos Private Equity has announced that its Ethos Fund VI has agreed to sell 100% of paper and packaging business Neopak Holdings for an undisclosed sum to Corruseal Group, a company whose origins date back to the early 1960s but is now 100% black-owned.
Neopak was first purchased by the Ethos Fund VI in 2015 from Nampak, when it was known as Nampak Corrugated, and currently has annual revenues of about R1.1bn. The Ethos website describes it as the second-biggest player in the SA corrugated and recycled packaging space, with a market share of about 18% thanks to its production of recycled containerboard and related paper products from its paper mill operations in Rosslyn, Pretoria, and its recycling operations in Amalgam, Johannesburg.
“The level of unsolicited interest we have seen from potential buyers serves as a strong endorsement of the attractiveness of the business, and what the management team has achieved in the last few years,” said Michael Jensen, a partner at Ethos.
The Ethos Fund VI is at the end of its investment cycle and is beginning to exit its underlying investments which since its inception in 2011 have included Primedia, the Twinsaver Group and RTT Logistics. The private equity group has already started raising capital for its next fund, Ethos Fund VII, which has a targeted size of $500m and plans to invest up to half that amount in private companies in the rest of Sub-Saharan Africa outside SA.
Corruseal is a group of more than 14 underling companies that employ about 1,500 people across seven provinces in business segments spanning recycling, paper and packaging. It supplies its products, which are made from both virgin and recycled paper, to the perishable and non-perishable foods and beverages, home care, automotive, general trade and the agricultural markets.
Corruseal said in the statement announcing its purchase of Neopak from Ethos that the transaction would position it to capitalise on the predicted growth in the SA paper and packaging market, which it expects will grow at a compound annual growth rate of about 5% over the next five years. The deal is still subject to certain conditions, including regulatory approvals, which are expected to be obtained in the first half of 2022.
Rand Merchant Bank, a division of FirstRand Bank, acted as Corruseal’s financial adviser and debt provider on the transaction, while Bowman Gilfillan and Werksmans were its legal advisers. Webber Wentzel acted as legal adviser to Neopak and Ethos.
“The Neopak business has delivered strong improvements in operational and financial performance over the last few years,” said Hamish Fraser, the CEO of Neopak. “The acquisition by the Corruseal Group will help us to maximise shared benefits for all stakeholders, while ensuring the long-term sustainability of our business in a highly competitive industry.”
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