Pact’s crate manufacturing arm eyed by Morrison & Co and IFCO

Pact Group chief executive Sanjay Dayal at the factory in Villawood. Picture: Ryan Osland

Two parties are understood to be looking at Pact Group’s crate manufacturing and pooling business, namely Morrison & Co and IFCO.

IFCO is a major global provider of reusable packaging solutions for fresh foods.

It operates a pool of over 290 million Reusable Plastic Containers (RPCs) globally, which are used for over 1.3 billion shipments of fresh fruits and vegetables, meat, poultry, seafood, eggs, bread, and other items from suppliers to grocery retailers every year.

It manufactures and markets a range of mass-market food products, related derivatives, intermediates and services.

Triton Partners and the Abu Dhabi Investment Authority purchased the business from Brambles in 2019 and have been looking at bolt on acquisition opportunities for the unit since.

New Zealand fund manager Morrison & Co, meanwhile, oversees a multiple mandates with total funds under management of over $US18bn ($27bn).

There are suggestions that Morrison and IFCO may now be wavering in their interest in buying the business.

Some have suggested that part of the problem has been that when Pact ran a sale process for the unit last year, it was only keen to sell part of the operation and few suitors would exist for a stake rather than the unit as a whole.

Working on sale options for Pact for some time has been investment bank Citi as the listed industrial group weighs ways to reduce its debt.

The unit forms part of the materials handling and pooling segment of the company.

It operates where Pact pools the crates, then sends them to farmers before the are sent back to supermarket and store customers where they are placed on shelves before being returned to the pallet pool.

Some consider this the best part of the business.

One group that could be interested in only part of the operation is Five V Capital, the company of former Australian CVC private equity executive Adrian MacKenzie, as it is prepared to take small company holdings.

It already owns a minority stake in eco friendly packaging company BioPak.

One of the sticking points for prospective buyers is that it’s contract with Woolworths is a shorter duration than some would prefer, thought to be only a couple of years.

At its half-year result Pact Group revealed that its debt levels are now 3.2 times its earnings before interest, tax, depreciation and amortisation, and is focused on reducing that debt burden to below 3 times by June.

Pact’s market value is $426m, yet its net debt is $633m – $32m higher than it was the same time last year.

Raphael Geminder’s Kin Group has 49.76 per cent of the company, and some believe he would be reluctant to tip in more equity for a raise.

Pact, founded by Mr Geminder in 2002, listed in late 2013 and makes plastic and steel packaging.

Pact booked an interim net profit of $23.9m, up 215 per cent on the previous corresponding half year period to December.