Jindal Poly Films in talks to acquire European operations of DuPont Teijin Films

MUMBAI: India's largest polyester-based packaging film company Jindal Poly Films is in advanced negotiations to acquire the European operations of DuPont Teijin Films (DTF) for Rs 2,000 crore ($300 million), said several people with knowledge of the mater. DTF is an equal joint venture between the two leading chemicals companies.
If completed, the acquisition will propel the company to the world's largest in a category that's dominated by Chinese conglomerate Kangde Xin Composite Material, multinationals like ExxonMobil and LyondellBasell, and homegrown Reliance Industries.

New Delhi-headquartered Jindal Poly Films (JPFL), the BC Jindal Group flagship, is India’s largest producer of BOPET and BOPP films. A derivative of the petrochemicals industry, biaxially oriented polypropylene (BOPP) and polyester (BOPET) films are typically used in the packaging industry. The former is predominantly used by global food and FMCG corporations due to its high moisture-retaining capacity while BOPET is used in flexible packaging for XRays, electronic displays, credit and debit cards and photography.

DTF, the fourth-largest player worldwide, was established in 2000 as a 50:50 global alliance combining the polyester film interests of DuPont and Japan's Teijin. The business includes existing joint ventures with DuPont-Hongji Films Foshan Co in China. The joint venture has businesses in Europe, Indonesia and Japan. The European arm has a global footprint, including plants in China, Europe and the US.

The European manufacturing sites are in Dumfries in Scotland and Luxembourg, with a global innovation centre in Teesside in the UK.

Goldman Sachs was mandated by DuPont and Teijin to run a sale process, according to sources.

"Jindal Poly Films has emerged the most competitive after a formal sale process was initiated. Now the discussions are bilateral in nature. The company is (also) in discussions with banks like Rabo to organise acquisition financing," said an executive.

There was no response to emails sent to JPFL CEO Rahul Bhatia, spokespersons of DuPont, Teijin and the joint venture.

Entering the BOPP and BOPET segment in 1996 with a plant in Nashik, a decade after commencing production of polyester yarns in Uttar Pradesh, the company has expanded operations both organically and inorganically. It first took over French company Rexor’s operation and then followed it up with the acquisition of the BOPP film business of ExxonMobil, with five plants, an R&D centre and more than 190 registered patents in 2013 for $160 million. This helped it to also become a leader in BOPP films in the US and Europe, specialising in metalised and coated films. Its current annual capacity for BOPP and BOPET is 593,000 tonnes.

China dominates the industry with half the global production. Currently, 70% of India's requirement is imported.

The acquisition is expected to help the Jindals strengthen their position across key categories.

DEAL VIA DUTCH ARM
Sources said Jindal Poly Films may use its Dutch arm to pursue the acquisition. For the nine months ended December 2016, the company posted a consolidated EBITDA (earnings before interest, tax, depreciation and amortisation) of Rs 556 crore on revenue of Rs 5,300 crore. The company had Rs 2,000 crore of debt at the end of December.

In the past three years, Jindal Poly Films has focused on reorganising operations. It merged the manufacturing business of Jindal Photo, increased capacities and ventured into new segments like non-woven to dominate global market share. The company has already declared its intent to invest in two additional BOPP lines — one each in the US and Europe — and in additional metalising and coating capacities entailing a capex of Rs 750 crore.

"Globally, the industry has seen a series of M&As leading to consolidation. Typically, valuations range from six-eight times EBITDA multiples," said an analyst involved in the matter.

In December 2014, Wendel H Tumaeur acquired Constanta Flexibles for $1.7 billion while last June RPC Group took over British Polythene for $420 million, the latest in a string of acquisitions that RPC has made in 2015-16. It acquired French bottle-top maker Global Closure Systems Group in March and bought four other companies during the year.

Founded in 1952 by BC Jindal as a manufacturer of steel pipes and fittings, the diversified group is currently into production of polyester film, BOPP film, photographic goods, cold rolled steel strips, galvanised sheets, metallised films, etc.

The group has decided to enter thermal power generation. BC Jindal is the brother of OP Jindal, whose sons Sajjan and Naveen run the sprawling steel-to-infrastructure business empire under their family name.