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Business deals

Thailand's SCG Packaging acquires UK peer for up to $182m

Company has cash to grow after gaining access to Europe and US

SCG Packaging raised 45.3 billion baht ($1.5 billion) in the country's second-largest IPO of 2020. (Screenshot from company website)

BANGKOK -- Thai chemical giant Siam Cement Group's packaging arm settled a deal to acquire its British competitor Go-Pak UK on Wednesday, taking advantage of rising demand for food containers in the coronavirus-induced delivery boom.

SCG Packaging will initially pay 77.5 million pounds ($106 million) to buy the entire 100% stake of Go-Pak. Then, it will make second and third payments based on the British company's financial performance in 2021 and 2022. Those additional payments will range from 30 million pounds to no more than a total of 56 million pounds, bringing the final acquisition cost to between $146 million and $182 million.

Investors reacted positively to the deal. SCG Packaging shares rose 1.7% to 44.75 baht on Wednesday.

Headquartered in Bristol with production facilities in southern Vietnam, Go-Pak sells disposable coffee cups, food containers and cutlery in the U.K., Europe and North America. Apart from its own production capacity of 4 billion units annually, it has a global sourcing network for over 250 related products.

SCG Packaging makes food packaging in Thailand and Malaysia. Its key market is Southeast Asia and Japan.

The purchase of Go-Pak will be done through its wholly owned Singapore subsidiary SCGP Solutions. SCG Packaging will begin merging Go-Pak into its operation from this month.

To fund the buyout, SCG Packaging is likely to use reserves it raised through an initial public offering in October. By selling 1.3 billion shares, or nearly 30% of issued shares, the company raised 45.3 billion baht ($1.5 billion) in the second largest IPO on the Thai stock market last year after mall operator Central Retail's $2.6 billion offering in February.

In the IPO prospectus, the company said it had plans to use the funds raised to invest in a food container manufacturer in Vietnam. SCG Packaging also said it had set aside 27 billion baht to expand its business through capacity growth and acquisitions. Go-Pak's buyout will require at most 20% of the allocated funds.

The largest shareholder of SCG Packaging's parent is King Maha Vajiralongkorn, who owns a 33.6% stake.

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