Essentra Buys Packaging Maker From Warburg for $455 Million

Essentra Plc plans to buy a specialist carton and labeling business from Warburg Pincus LLC for $455 million to add North American health and personal-care assets in a shift away from cigarette-filter fibers.

The purchase of Clondalkin SPD, based near Essentra’s headquarters in Milton Keynes, England, will be partly financed with a sale of new shares. The new business will propel Essentra’s revenue from packaging in pharmaceuticals and personal-care to about 420 million pounds ($669 million) from about 150 million pounds currently, Chief Executive Officer Colin Day said in an interview today.

As well as grabbing share in the strictly regulated pharmaceutical-packaging market, the acquisition will bring Day, a former finance director at Reckitt Benckiser Group Plc, closer to an industry from his past. Essentra will also gain a larger foothold in cartons and instructions for beauty-care products at a time when makers are repackaging more products to lower the expense of introducing new ones, he said.

“The acquisition gives Essentra a global presence in health care, as well as bringing a complementary product suit and some new technology,” Neil Dawson, an analyst at Citigroup Inc., wrote in a report.

Essentra rose as much as 2.9 percent to 734 pence as of 9:06 a.m. in London, the highest intraday price since Oct. 13. That pared the stock’s decline this year to 15 percent, valuing the company at 1.74 billion pounds.

Industry Shift

The manufacturer reached the agreement with Warburg after several months of negotiations, Day said. The U.K. company’s cigarette-filter business will now account for 20 percent of some 1.3 billion pounds in annual turnover, he said. Fiber technologies generated 46 percent of revenue last year, according to data compiled by Bloomberg.

“In manufacturing terms, this is a world apart from cigarettes,” Day said. “This is a sector that won’t let you down as even in an economic recession people get ill and buy medicines.”

The company is paying 8.1 times enterprise value to earnings before interest, taxes, depreciation and amortization for Clondalkin, according to Citigroup estimates.

Deutsche Bank AG is the corporate broker and adviser to Essentra on the Clondalkin transaction and is managing the stock sale, the manufacturer also said.

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