Deal focus: Blackstone takes over EPL’s packaging empire

Most global consumers have never heard of Essel Propack (EPL), but their homes are probably full of its products. The India-listed company, founded in 1982, is the world’s largest producer of laminated tubes, used to hold a wide range of liquids and gels including toothpaste, face wash, cosmetics, and pain relief creams. Customers include marquee brands like Colgate, Palmolive, and L’Oreal.

These brand relationships are the reason that The Blackstone Group recently agreed to pay up to INR32.1 billion ($461 million) for a controlling stake in EPL. Choosing a partner for a brand’s packaging needs may seem like a minor decision from the consumer standpoint, but it represents a major long-term commitment.

“For personal care products, how they are packaged is the brand,” says Amit Dixit, a senior managing director for private equity in India at Blackstone. “The packaging, the printing, the colors – that is the selling point. That’s why these customer relationships are so sticky that they can go on for 20 years: nobody wants to change how a L’Oreal face cream package looks, because it’s working so well.”

For current majority owner Ashok Goel – who will sell a 51% stake to Blackstone, triggering a mandatory open offer for a further 26% – the sale is a way to transform EPL from an Indian company with overseas interests to a truly multinational business. Blackstone plans to help EPL leverage its leading position in toothpaste – where it commands a market share of nearly 40% – to achieve growth in areas such as beauty and cosmetics.

The company’s packaging can be used by both premium and lower-end consumer brands, which means success is tied to the growth of the personal care and cosmetics market in general rather than any particular segment. This is most clearly visible in the geographic distribution of performance, where its strongest growth in recent years has been in places where premium brand penetration is lower.

“This company is growing its revenue by more than 10% per year, but if you break that down, it’s a combination of single-digit growth in developed markets, and high double-digit growth in emerging markets,” says Dixit. “We want to play into the growth that is already happening, which is due to both newer premium products being introduced in these markets and higher penetration of existing products.”

With 20 factories in 10 countries, covering Asia, Europe, the Middle East, and the Americas, EPL already boasts a wealth of global experience that is rarely seen in Indian companies. Blackstone believes the company is well positioned to take advantage of a partnership with a leading global PE firm.

“We always look for what Blackstone can bring to the table, and for this company, because it’s truly global already, it can leverage Blackstone’s global network,” Dixit says. “We have many seasoned executives in this sector, and we think they can help the company in its growth trajectory for newer markets and newer geographies.”

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• Topics
• South Asia
• Industrials
• Consumer
• Buyouts
• India
• manufacturing
• The Blackstone Group