Peters Papers, paper merchant division of South African Nampak Limited, has been acquired by Actis, a leading private equity investor in emerging markets, for approximately US$42m, subject to certain suspensive conditions. The transaction has been concluded in partnership with the management of Peters Papers and Izingwe Capital, a Black Economic Empowerment (BEE) investment company led by Sipho Pityana, the former director general of the Departments of Labour and Foreign Affairs. The anticipated effective date of the transaction is 1 March 2005. Actis will be the majority shareholder. This transaction positions Peters Papers as the leading empowered company in its sector.
Peter Schmid, a managing partner of Actis, said: “There has been significant private equity activity in the paper and pulp industry worldwide and we believe the South African marketplace is ripe for similar investments. This transaction is an ideal example of the type of deal we like to do. It reflects our model in which value creation is based on cash flows and both management and the BEE partners have a meaningful stake in the business. It is an example of solid and genuine empowerment with commitment from all parties.”
This transaction demonstrates Izingwe’s focus to invest in solid companies with strong management.
Tsakani Matshazi, the financial director of Izingwe, said: "We have developed a strong relationship with Actis and are delighted to be able to participate in this transaction. We have specific capacity and expertise which allows us to actively contribute to the business. We will be very active in securing business and implementing internal transformation. We have been successful in making a big contribution to our existing investments and we believe we can do the same for Peters Papers."
Izingwe Capital will also target business throughout Africa, which presents significant opportunities for growth.
For Nampak, which is Africa’s largest and most diversified packaging manufacturer, the sale is consistent with its strategy of focusing on core packaging businesses and its stated intention of seeking opportunities for meaningful black economic empowerment.
“I am delighted that we were able to conclude the transaction and to have assisted in the introduction of a strong empowerment partner to the business” said Neil Cumming, managing director of Nampak Africa. “I am confident that the new arrangement will enable management to grow and develop their company. Peters Papers is a healthy business and the new structure should be value-creating for the new shareholders.”
Peters Papers, which has been in business for approximately 100 years, distributes paper and associated products to commercial printers and resellers in South Africa. It represents more than 40 leading paper mills and graphic sundries suppliers from around the world and employs 300 permanent and 100 contract staff in its nationwide sales and distribution network in South Africa.
The transaction is the second deal in Africa by Actis this year. Actis is committed to investing US$500m across the continent in the next five years and currently has US$1,1 billion under management in Africa. Its most recent investment was in Starcomms, Nigeria.
Schmid added: “Peters Papers is a well managed business with a long history. It is well known for its excellent service levels and solid customer relationships. We believe we are entering the sector at the right time in the paper cycle and Peters Papers has huge potential in Africa. We will concentrate on helping to build and strengthen the business through the appointment of Actis and industry experts to the Board. Actis has always been an active investor and it is by partnering with management that we achieve value growth.”
John Darling, chief executive of Peters Papers, said: “Management and I are thrilled to be able to participate in this transaction as we believe that Peters Papers has enormous potential, especially with our new empowerment partners. We will be proactively looking for ways to improve our service levels and to introduce our product offerings to a broader customer base in both SA and the rest of Sub-Saharan Africa.”