SYDNEY, AUSTRALIA: IVE Group (IVE) has agreed to buy JacPak Pty Ltd, a Melbourne-based packaging company, for $35 million. JacPak makes folding cartons for products like food, beverages, and cosmetics. It has annual sales of about $45 million and is one of the top players in the $800 million folding cartons market in Australia.
The deal is expected to be completed by 31 October 2023. IVE will pay $27.9 million upfront, $4 million later if JacPak meets certain targets, and take over $3.1 million of JacPak’s equipment loans. IVE will use its acquisition fund to pay for the deal.
The deal will benefit both IVE and JacPak. IVE will be able to enter the packaging sector, which is similar to its existing businesses and has good growth prospects. IVE also plans to save costs by buying materials cheaper, using its own machines more, and cutting administrative expenses. It expects to save $2.4 million a year by 2024.
JacPak will continue to operate as a separate business, but will work closely with IVE to sell more products to its customers. JacPak’s owner, Ashley Tomlin, will stay with the business after the deal.
The deal will also boost IVE’s earnings. In 2024, JacPak is expected to add $8.4 million to IVE’s earnings before interest, tax, depreciation and amortisation (EBITDA) and $3 million to its net profit after tax (NPAT). This will increase IVE’s earnings per share (EPS) by about 7%. This means that IVE is paying about 4.2 times JacPak’s EBITDA for the deal.
JacPak also has room to grow its sales by $15 million using its existing capacity. If it does that, it could add another $3.5 million to its EBITDA and $2.5 million to its NPAT.
If JacPak achieves all these targets, it could have sales of about $60 million, EBITDA of about $11.9 million, and NPAT of about $5.5 million.