Global PE giant Blackstone with $ 620 b in assets enters Sri Lanka

• In landmark deal via Indian entity 56.45% of Piramal Glass Ceylon sold for Rs. 6.2 b
• Move part of broader acquisition of Indian container glass packaging firm for $ 1 b announced in mid-December
• Mandatory offer announced at Rs. 11.60 per share
• Confidence by private equity firm augurs well for SL, say analysts
• Asia Securities Group figures in the deal as buy-side advisor and executing stockbroker
• Sole glass bottle manufacturer Piramal Ceylon Glass doubled first 9 months after tax profit to Rs. 694 m
• Boosts prospects for exports with new product launches in 3Q

By Nisthar Cassim

World private equity giant Blackstone Group yesterday entered Sri Lanka, buying a 56.45% stake in Piramal Glass Ceylon PLC for Rs. 6.2 billion as part of the broader acquisition of the Indian giant business in December.

Via PGP Glass Ltd., Blackstone paid Rs. 11.60 per share to buy 536.331 million shares via crossing. Blackstone also announced a mandatory offer to remaining shareholders. The acquisition price implies a total enterprise value of Rs. 13.9 billion for the target company.

Asia Securities Advisors Ltd. acted as the buy-side advisor and Asia Securities Ltd. acted as the executing stockbroker to the Blackstone Group in its landmark acquisition. 

This transaction reaffirms Asia Securities’ position as the preferred investment banking and stockbroking partner to the most sophisticated investors for cross-border M&A transactions in Sri Lanka. 

Piramal Glass makes container glass packaging with a capacity of 1,475 tons per day. It has factories in the USA, India and Sri Lanka.

Sources close to the deal said that Blackstone, which manages $ 620 billion worth of assets, is excited about its entry into Sri Lanka and the investment in Piramal Glass Ceylon, which is the market leader in the domestic container glass packaging industry apart from exporting to several countries. 

“The fact that Blackstone is going ahead with the Piramal venture in Sri Lanka reinforces that the local operations are important to the Indian giant, to step up exports (currently 20-30% of revenue), and the superior manufacturing facility and product design and development knowhow,” they added.

“Blackstone is a long-term investor and given its international experience in similar investments and global reach, it will significantly add value to Sri Lankan ventures. From a country standpoint, Blackstone’s entry augurs well for Sri Lanka,” market analysts opined. 

In mid-December 2020 Blackstone signed a deal to acquire Piramal Group’s Piramal Glass for around $ 1 billion, and this too was completed yesterday. 

The deal contour includes an upfront payment of $ 850 million while Piramal Group will get approximately $ 150 million on achieving certain milestones, to be paid over two years.

Blackstone has a market value of $ 40 billion in assets in India, making it one of the top 10 business groups in India. Blackstone has invested over $ 15 billion across Private Equity ($ 6.9 b), Real Estate ($ 7.8 b), and Tactical Opportunities ($ 400 m).

In 2019/20, Blackstone in India invested $ 6 billion across Private Equity ($ 2.5 b), Real Estate ($ 3.2 b) and Tactical Opportunities ($ 300 m). Blackstone’s recent transactions include a partial exit from Essel Propack.

Post the announcement on 11 December 2020, Piramal Ceylon Glass was the most traded stock at the CSE with a turnover of Rs. 1 billion involving 108.4 million shares. The share price gained by 80 cents or 9% to Rs. 9.50. 

Widely on speculation of a mandatory offer, which some ruled out then, share price of Piramal rose last year. It finished the September 2020 quarter at Rs. 4.20 after hitting a high of Rs. 4.50 and ended 2020 at Rs. 9.40. In the New Year – January, February and last week – Piramal Glass closed unchanged at Rs. 9.90. Its 52-week highest was Rs. 11.40 and the lowest was Rs. 2.80.

Yesterday around 29,000 shares of Piramal Ceylon Glass traded apart from the crossing volume. It closed at Rs. 11, up by 5.7% or 60 cents. 

The Piramal Ceylon Glass public float is 43.42% held by 14,474 shareholders. Major minority shareholders as at 31 December 2020 included the Employees’ Provident Fund (9.5%), Merrill J. Fernando and H.M. Udeshi (1% each).

The Piramal Ceylon Glass manufacturing facility in Horana has the capability to offer glass containers in different shapes and colours for multiple industries such as food, liquor, pharmaceutical, agro chemical and soft drinks.

For the nine months ended on 31 December 2020, Piramal Ceylon Glass revenue was Rs. 5.96 billion and operating profit was Rs. 933 million as against Rs. 5.8 billion and Rs. 713 million respectively a year earlier. Profit after tax doubled to Rs. 694 million. 

Domestic sales in the first nine months grew by 6% to Rs. 4.17 billion whilst exports saw a marginal drop from Rs. 1.8 billion to Rs. 1.78 billion.

In the third quarter, sales to the domestic market grew by 12% from Rs. 1.5 billion and exports dipped by 10% to Rs. 722 million due to restricted vessel options to countries like Australia, USA and India. However, the company is optimistic of recovering the deferred export sales in Q4 once the situation is normalised.

It continues to make inroads in new international markets with product launches. The third quarter witnessed new launches in Australia, India, Angola, UK and Rwanda. The strategy to expand and innovate in new product development and increase global footprint has helped the company mitigate demand fluctuations in its existing markets resulting from the pandemic, Piramal Ceylon Glass said in a statement accompanying interim results.