Blackstone To Acquire Majority Stake In Essel Propack

Blackstone Group will buy a controlling stake in Essel Propack Ltd., a company promoted by Ashok Goel, the younger brother of Subhash Chandra who's the promoter of the Essel Group companies such as Zee Entertainment Enterprises Ltd.

Funds managed by the private equity company agreed to buy a 51 percent stake in Essel Propack at Rs 134 a share from Ashok Goel Trust, controlled by Goel's family, according to a media statement. The trust and its affiliates hold around 57 percent equity currently.

“This the best among all the offers that had come. Nobody is on any sort of disadvantage here,” Goel, vice chairman and managing director of the company told BloombergQuint.

The takeover will also trigger a mandatory open offer for an additional 26 percent shares of the company. The open offer price has been fixed at Rs 139.19 apiece. That's a 5 percent discount to the current market price. Based on the open offer subscription, the total consideration of the deal will vary between Rs 2,157 crore and Rs 3,211 crore. Following the open offer, Ashok Goel will retain 6 percent stake in the company.

Goel will receive Rs 16 crore per year for the next five years for continuing as an advisor at the firm, he said in a conference call.

While Essel Propack is included in the Essel Group, the proceeds will only go to Goel's family trust, he said. “The beneficiary of this family trust is me and my immediate family. The timing may seem a little odd but I had started this process before any of the group issues were known.”

Subhash Chandra has been looking for potential suitors for his flagship Zee Entertainment.

Earlier this year, lenders of the debt-ridden Essel Group agreed not to trigger default on the over Rs 11,500 crore that it has failed to repay. They also agreed to a standstill till Sept. 30 even if any actual default takes place due to stock price movement.

Mutual funds have a total exposure of around Rs 7,500 crore to non-convertible debentures issued across nearly 13 entities of the Essel Group, according to data available with rating agencies. Exposure of non-banking financial companies to these securities is about Rs 4,000 crore.

Founded in 1982, Essel Propack is among the largest manufacturers of laminated tubes for consumer companies. With a 10 percent revenue growth till December last year, it is also one of Essel Group's financially healthier assets.

The stock had closed 1.2 percent higher ahead of the announcement, compared with a 1.3 percent fall in the benchmark BSE Sensex.

Watch the full interview here