The transaction will be funded through 33.75m SIG shares issued from existing authorized capital and €370m ($416.5m) cash; the existing debt of Scholle IPN will be refinanced at closing. The transaction is expected to close before the end of the third quarter of 2022 subject to customary closing conditions.
SIG said the acquisition diversifies its exposure to growing and resilient end-markets. SIG's portfolio of sustainable food and beverage carton solutions will be expanded into bag-in-box and spouted pouches for retail, institutional and industrial customers. SIG and Scholle IPN have many similarities and are highly complementary businesses in terms of systems and product offering. SIG said the combination will unlock significant growth opportunities and value.
Founded in 1945, Scholle IPN is the inventor of the bag-in-box (2l -1,500l capacity) and the number two in spouted pouches (50ml - 500ml capacity).
The acquisition will therefore expand SIG's portfolio into both larger and smaller formats. Scholle IPN is headquartered in the US and has approximately 2,100 employees globally. Revenue in the twelve months to December 31, 2021 was €474m ($534m) with adjusted EBITDA of €90m ($101m). The US accounts for around 55% of revenue and the acquisition will increase SIG's presence in the market. It will also enable the expansion of the Scholle IPN portfolio into the emerging markets of Asia Pacific, Latin America and Middle East Africa, where SIG has a well-established presence.
SIG said growth in bag-in-box is being driven by the shift from rigid to flexible packaging, which significantly reduces the amount of material needed to package the product. Scholle IPN has a longstanding focus on sustainability and on the light-weighting of both packaging and fitments. It is a pioneer in the development of mono-materials designed for recycling. Joining together the R&D capabilities of the two companies will deliver more value to customers by advancing the development of material and aseptic technology to reduce carbon emissions and food waste.
Around 70% of Scholle IPN revenues are in food and beverages. SIG said the acquisition will enable it to build on its core strength in aseptic technology and to expand its use in both pouches and bag-in-box. It will also drive SIG's expansion into new categories such as wine and water.
In addition, run-rate cost synergies of €17m ($19m) will be generated in areas such as procurement and manufacturing efficiencies.
Samuel Sigrist, CEO of SIG, said, "The acquisition of Scholle IPN cements SIG's position as a global leader in innovative and sustainable packaging for food and beverages. It is consistent with our strategy of geographic and category expansion accompanied by share gains in key markets. By delivering clear benefits for customers, consumers, and the environment, we will drive value for shareholders."
Laurens Last, chairman and owner of Scholle IPN, said, "This combination is compelling for our customers, who will benefit from our capabilities and expertise in the liquid packaging industry.
I am excited about the future of the combined business, and I look forward to our joint innovation, with SIG further developing packaging substrates and solutions that are at the forefront of sustainability."
As a result of the share consideration, Last will become the largest single shareholder in SIG, with a pro-forma shareholding of 9.1% subject to a lock-up period of 18 to 24 months. Last will also be nominated for election to the SIG board of directors at the forthcoming AGM in April. Ross Bushnell, CEO of Scholle IPN, will join SIG's group executive board.
The transaction is expected to be accretive to cash flow and adjusted earnings per share from the first full year after completion, adding to the strong and resilient financial profile of SIG, with above market growth, best-in-class margins, superior cash conversion and attractive dividends.
Following the acquisition SIG said it will maintain mid-term revenue growth guidance of 4 to 6% p.a. at constant exchange rates. The combined business (including Evergreen Asia) has scope for margin expansion and the adjusted EBITDA margin is expected to rise above 27% in the mid-term. Net capital expenditure as a percentage of revenue is expected to be 7 to 9%. The company said it will maintain its progressive dividend policy with a payout ratio of 50 to 60% of adjusted net income. The commitment to a net leverage ratio of towards 2x is also maintained, with an expectation of net leverage around 2.5x by the end of 2024.
In the context of the acquisition announcement, SIG announced strong preliminary results for the full year 2021. Core revenue was €2.047bn ($2.31bn), representing a like-for-like increase of 6.6% at constant currency, exceeding the guided range of 4 to 6%. Adjusted EBITDA increased to €571m ($643m) with an adjusted EBITDA margin of 27.7%, compared with 27.4% in 2020. Free cash flow was €258m ($290m) compared with €233m ($262m) in 2020. At the AGM the board of directors will propose an increase in the dividend to CHF 0.45 ($0.49) per share (2020: CHF 0.42/$0.45 per share) to be paid out of the capital contribution reserve.