Sun European seals two packaging deals worth $700 mln

Wed Jan 2, 2013 8:27am EST

* Buying Rexam's cosmetics packaging unit for $459 mln

* Buying Paragon Print and Packaging for $244 mln

* Sun Capital hopes to raise $3 bln global fund-source

By Anjuli Davies

LONDON, Jan 2 (Reuters) - Private equity firm Sun European Partners has sealed two acquisitions in the packaging sector totalling around $700 million, helping to consolidate an industry battling to cut costs to cope with faltering demand.

Sun European, an arm of U.S.-based Sun Capital, said on Wednesday it had received regulatory approval to buy the cosmetics division of Rexam's personal care business and that it was also buying Paragon Print and Packaging.

The deals bring Sun Capital's total number of deals in the packaging sector globally to 34 since its inception in 1995.

Sun Capital which currently manages around $8 billion globally, also hopes to raise $3 billion for a global fund to invest across sectors by the end of the year, a person familiar with the matter told Reuters.

"There is scope for consolidation in Europe," Davy Stockbrokers' analyst Barry Dixon said of the packaging sector, which has been hit hard by weak economies in the region.

"There's been a move towards higher-quality consumer packaging especially given the rise of discount retailers such as Aldi and Lidl who use consumer-ready packaging not just for transporting goods but for shelving and marketing," he added.

This trend can been seen in a number of deals recently.

South Africa's Mondi Group bought German packaging firm Nordenia International in July for $782 million in a push to diversify the paper maker's presence in consumer packaging.

Britain's DS Smith, meanwhile, bought the recycled packaging operations of Svenska Cellulosa Aktiebolaget in January for 1.6 billion euros to win more business from the world's top consumer goods companies.

British drinks can maker Rexam put its underperforming personal care division up for sale in February in two parts for a total of $709 million.

Sun European is buying the unit's cosmetics division through its French-headquartered affiliate Albea for $459 million after winning anti-trust approval by Chinese authorities.

Silgan Holdings agreed to acquire the unit's high-barrier food packaging business for $250 million.

The cosmetics division operates 11 manufacturing sites across Europe, the Americas and Asia and employs 6,500 people.

Terms of the transaction to acquire Paragon Print and Packaging, which provides labels and packaging for food retailers such as Waitrose and Tesco, were not disclosed but a person familiar with the matter said the deal had an enterprise value - debt plus equity - of 150 million pounds ($244 million).

Established in 1994 Paragon, with turnover of more than 170 million pounds, operates from 10 UK manufacturing sites and employs about 1,200 people servicing around 1,800 customers.

Founder Tony Lennon will remain as an investor and adviser and Chief Executive Mark Lapping will continue in his role.

Before the transaction, Paragon's management owned 51 percent of the company alongside Equistone Partners Europe with a 34 percent stake and LDC with the remaining 15 percent.

In 2001, Equistone invested 12 million euros to buy a 50 percent stake in the packaging provider.

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