Mondi Group has proposed to unbundle Mondi Packaging South Africa (MPSA) in a move that will see the latter list separately on the JSE.
The group said MPSA`s future growth plans, particularly with respect to its rigid plastics business, are constrained by the Mondi Group`s differing strategic focus. The demerger endorses MPSA`s own strategy and provides shareholders with a clear benefit as both businesses would be able to take better advantage of their respective growth opportunities.
David Hathorn, CEO of Mondi Group, said: “This is the right time to demerge MPSA, for both Mondi Group and MPSA.
Whilst Mondi Group has been a very supportive owner, this move will give MPSA the flexibility it needs to develop its core growth areas. MPSA is unique within the Group as no other part of Mondi produces rigid plastics or cartonboard and therefore the Board felt that MPSA would be best placed to take advantage of the considerable opportunities available to it as an independent entity.”
MPSA`s revenue in 2010 from continuing operations was R5.7 billion.
Currently, Mondi owns 70% of MPSA, the Shanduka Group owns 25% and Mondi Employee Investment Company Limited (a Mondi Employee Share Option Plan) owns 5%. The shareholders have agreed to a recapitalisation of MPSA ahead of its listing, with a view to creating a long term capital structure for the business based on net debt of around 2 times current earnings before interest, tax, depreciation and amortisation.
The recapitalization would result in Mondi`s equity interest in the business increasing to around 90%.
Shanduka Group would reduce its interest in MPSA to around 10% just before the demerger and has committed to stay invested in MPSA for at least 180 days following its listing.