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Top private equity operators eyeing little-known Goodpack
[SINGAPORE] A little-known Singapore company has attracted the attention of some of the largest global private equity players.
Goodpack, which leases steel boxes used in transporting cargoes, reportedly held meetings with Blackstone Group and Carlyle Group last week.
The Business Times understands that KKR is also interested in the firm, while analysts have pointed to China International Marine Containers Co - which supplies Goodpack's metal boxes, known as intermediate bulk carriers (IBCs) - as another possible buyer.
Goodpack said on March 19 that it has been approached by unnamed parties, which could lead to a general offer being made. The company has appointed Rippledot Capital Advisers as its financial adviser, and its founder David Lam - who owns 32 per cent of the firm - is said to be open towards a takeover offer.
Several banks are involved in financing a deal for Goodpack, sources told BT.
The counter has run up 26 per cent since early March to touch an all-time high of $2.33 on April 4. The counter, which ended at $2.23 on Friday, is now trading at a price-earnings ratio of 18.9 - above its five-year historical average of 15 times earnings.
The latest round of speculation over possible takeover bids is not new; Goodpack has, over the years, attracted various suitors.
In 2008, it had hired Macquarie to look at strategic alternatives - from a sale to a strategic buyer to bringing in new investors. At that time, Australian packing companies Loscam and Brambles were reported to be interested in bidding for the firm.
Brambles, which leases wooden pallets, reusable plastic containers and IBCs to the fast-moving consumer goods industry, said on March 20 that while it has engaged in preliminary discussions with Goodpack on several previous occasions, including in the recent past, these did not pro-gress.
Nonetheless, its statement that it is "not currently in active discussions with Goodpack," and that it "will continue to monitor the situation" has led some to speculate that Brambles has not ruled out the option completely either.
Analysts attribute Goodpack's appeal to its strong position in a market niche and its global network which makes for a wide economic moat.
Goodpack rents reusable IBCs to tyre manufacturers, chemical and juice producers such as Michelin, Bridgestone, BASF, Campbell and Heinz, for use in transporting their products, replacing the traditional wooden boxes and metal drums used in these industries.
Besides being environmentally-friendly, Goodpack's solutions provide cost savings of about 20 per cent to clients, said Ho Pei Hwa of DBS.
On top of that, Goodpack has 15 more years to its design patent for the IBC. Coupled with the stickiness of its current clients, and the estimated US$900 million needed in capital expenditure for another player to match Goodpack's fleet size, there are significant barriers to others entering the industry, pointed out OCBC analyst Yap Kim Leng.
The firm was founded in 1989, when Mr Lam, who was a rubber trader then, saw the need to solve a packaging problem that plagued natural rubber buyers - splinters, sawdust and other debris from wooden crates used to package natural rubber bales were contaminating the commodity.
"So I thought we should look at something that is easy to pack, environmentally friendly, easy to stack and cheaper than the wood we were buying," Mr Lam, now Goodpack's chairman, told The Straits Times in an interview last year.
Goodpack has already made a mark for itself in the natural and synthetic rubber markets, holding about 40 per cent and 32 per cent of the respective market share.
It is expecting the synthetic rubber business to remain a key growth driver over the next three years, as it sees a healthy pipeline of synthetic rubber plants globally.
Meanwhile, Goodpack has also been making a big push into the automotive parts industry in recent years. It already has over 20 contracts from autopart customers. The firm is also receiving more enquiries and trials.
The addressable market size in autoparts is more than 10 times the natural rubber and synthetic rubber businesses combined, explained CIMB analyst Jessalynn Chen. "If they can break into this business, it will allow them to grow a lot faster."
A takeover by global private equity operators such as Blackstone - which have strong connections to auto part manufacturers - could also help Goodpack break into the market, she added.
Auto parts manufacturers who are currently trying out Goodpack's system and potentially switching over to it before the second quarter of the next financial year could provide a major upside surprise for the firm, said Mr Yap of OCBC.
At the same time, the turnaround of the US and European economies looks set to benefit the firm, which had 45 per cent of its revenue from these regions in 2013, he added.
Among the six analysts covering the stocks, three have a "buy" call, while the rest have a "neutral" call.