4 Key events and transactions
The following key events and transactions took place in the year ended 31 December 2021 or were announced in 2022 before the consolidated financial statements were approved.
Acquisition of the remaining shares of the joint ventures in the Middle East
On 25 February 2021, the Company acquired the remaining 50% of the shares of its two joint ventures in the Middle East (“the acquisition”) from its joint venture partner Al Obeikan Group for Investment Company CJS (“OIG”) for a consideration of €490.3 million, split into cash of €167.0 million and 17,467,632 newly issued SIG ordinary shares with a fair value of €323.3 million at the time of closing. The new SIG shares were issued out of authorised share capital (see note 24). The acquisition gives the Group control over a business with strong growth prospects in a growing market and expands its global presence. For additional information about the acquisition, see note 27.
After the acquisition, the Group repaid external loans of one of the former joint ventures by using available cash and a new unsecured credit facility of €100.0 million that has subsequently been repaid. See note 22.
The acquisition of the remaining shares of the joint ventures in the Middle East has resulted in a split of the segment Europe, Middle East and Africa (“EMEA”) into two segments: segment Europe and segment Middle East and Africa (“MEA”). See further note 7.
Organisational changes in the Group Executive Board and the Board of Directors
Samuel Sigrist, the former Chief Financial Officer, was appointed Chief Executive Officer effective 1 January 2021 following the voluntary departure of the former Chief Executive Officer (Rolf Stangl). On the same date, the appointment of Frank Herzog as Chief Financial Officer took effect. José Matthijsse took over the position of President and General Manager of Europe effective 1 February 2021.
Abdelghany Eladib, the Chief Operating Officer of the Group’s former joint ventures in the Middle East, became a member of the Group Executive Board effective 28 February 2021. He has taken on the newly created role of President and General Manager of Middle East and Africa.
Abdallah al Obeikan, Chief Executive Officer of OIG and, prior to the acquisition, Chief Executive Officer of the Group’s former joint ventures in the Middle East, was elected to SIG’s Board of Directors at the Annual General Meeting in April 2021.
Martine Snels was elected as a new member of SIG’s Board of Directors at the Annual General Meeting in April 2021. She has considerable experience in the food industry, including roles with GEA and FrieslandCampina.
Lawrence Fok announced on 29 October 2021 that he would leave his role as President and General Manager of Asia Pacific as of 31 December 2021. He will leave the Group in 2022, after a transition period (see also note 29). Due to the Group’s growth in Asia Pacific, his role in the Group Executive Board has been taken over by two executives with effect from 1 January 2022. Fan Lidong has taken on the newly created role of President and General Manager of Asia Pacific North. He has 30 years’ experience in the packaging industry and has worked for SIG in China in various leading positions for more than twelve years. Angela Lu has taken on the newly created role of President and General Manager of Asia Pacific South. She has considerable experience in the food and beverage industry, including roles with Nestlé and Yeo Hiap Seng.
Suzanne Verzijden joined the Group Executive Board as Chief People and Culture Officer, effective as of 1 January 2022. She has 16 years’ experience in human resource topics in a number of different roles and locations.
Sale of New Zealand paper mill
After the Group’s announcement in March 2021 that it would close its paper mill in New Zealand (Whakatane), it was approached by potential buyers. The Group sold the paper mill on 3 June 2021 for NZD 1 to a consortium of investors who will enable the paper mill to continue to operate. The sale of the mill resulted in a loss of €12.1 million. In connection with the initial decision to close the mill, the Group expected to incur plant decommissioning and redundancy costs of around €30 million. However, due to the sale, only €9.8 million of restructuring costs relating to the employees of the mill were recognised in the year ended 31 December 2021. See also notes 9 and 26.
New production plant for sleeves in Mexico
The Group announced in April 2021 that it will construct a new production plant for sleeves in Mexico. Operations are planned to start in the first quarter of 2023. The plant will be leased by the Group (see also notes 12 and 13).
Announcement of agreement to acquire Evergreen’s fresh carton business in Asia Pacific
The Group announced on 5 January 2022 that it has entered into an agreement to acquire Evergreen’s fresh carton business in Asia Pacific (“Evergreen Asia”). It will acquire 100% of the shares of Evergreen Packaging Korea Ltd., Evergreen Packaging (Shanghai) Co. Ltd. and Evergreen Packaging (Taiwan) Co. Ltd from Evergreen Packaging International LLC.
Evergreen Asia provides filling machines, cartons, closures and after-sales service to its customers in the fresh and extended shelf life dairy segment, mainly for milk, and has production plants in China, South Korea and Taiwan.
The acquisition will allow the Group to access a new customer base in an attractive growing market in Asia and also to expand its offering to existing customers. The Group will use its experience to further develop the fresh carton business, drawing on its regional R&D presence and innovation capabilities as well as its marketing expertise to introduce more innovative packaging formats in the Asian fresh dairy market. Synergies are expected from commercial opportunities and cost optimisation. In addition, the business will benefit from a supply arrangement at market for coated carton board.
The acquisition is expected to close in the second or third quarter of 2022. The closing is subject to customary closing conditions, including approvals from regulatory authorities. Evergreen Asia will be part of the Group’s APAC segment.
The consideration for the shares of the Evergreen entities will be based on an enterprise value of $335 million (subject to customary closing adjustments) on a cash-free, debt-free basis and will be paid in cash at the closing of the acquisition. The final consideration will be determined at the time of the completion settlement. The acquisition will initially be financed through a bridge facility of €300 million with a maturity of up to 18 months, which will be refinanced with long-term financing arrangements.
In the year ended 31 December 2021, Evergreen Asia generated revenue of approximately $160 million and adjusted EBITDA of approximately $28 million (unaudited). See note 9 for the Group’s definition of adjusted EBITDA.
Announcement of agreement to acquire Scholle IPN
The Group announced on 1 February 2022 that it has entered into an agreement to acquire 100% of Scholle IPN, a privately held company, from CLIL Holding B.V..
Scholle IPN is a leading innovator of sustainable packaging systems and solutions for food and beverages, with retail, institutional and industrial customers. It is the global leader in bag-in-box and number two in spouted pouches.
The acquisition will enable the Group to expand its product portfolio, increase its presence in the United States and leverage its established presence in emerging markets. Synergies and cost efficiencies are expected in areas such as commercial operations, technology, innovation and sustainability as well as procurement and manufacturing.
The acquisition is expected to close in the second or third quarter of 2022. The closing is subject to customary closing conditions, including approvals from regulatory authorities.
The consideration for the shares of Scholle IPN will be based on an enterprise value of €1.36 billion (at an USD/EUR exchange rate of 1.12862) and an estimated net debt position of €310 million as of 31 December 2021, reflecting an equity value of €1.05 billion. The acquisition will be funded through a mix of cash and shares, and the refinancing of existing debt.
The consideration will be split into cash of €370 million (subject to customary closing adjustments) and 33.75 million newly issued shares, to be transferred at the closing of the acquisition, and a contingent consideration. The new shares will be issued out of authorised share capital. The existing debt of Scholle IPN will be refinanced at closing. The final consideration, excluding the contingent consideration, will be determined at the time of the completion settlement. The contingent consideration depends on Scholle IPN outperforming the top-end of the Group’s mid-term revenue growth guidance of 4-6% per year for the years ending 31 December 2023, 2024 and 2025, and would be paid in cash in three annual instalments of up to €89 million ($100 million) per year. Payments for growth rates ranging from 6–11.5% per the respective year will be made based on a pre-agreed ratchet structure.
The consideration to be paid in cash at closing and the repayment of existing debt will be financed via a bridge facility with a maturity of up to 18 months, which is expected to be refinanced through a combination of long-term debt and a share capital increase of approximately €200-250 million.
The current owner of Scholle IPN, Laurens Last, will become the largest single shareholder in SIG after closing of the acquisition with an approximate shareholding of 9.1% (with a lock-up period of 18 to 24 months). He will also be nominated for election to the Board of Directors of SIG at the forthcoming Annual General Meeting on 7 April 2022. Ross Bushnell, CEO of Scholle IPN, will join SIG’s Group Executive Board subject to and as of closing of the acquisition.
In the twelve months ended 31 December 2021, Scholle IPN generated revenue of approximately €474 million and adjusted EBITDA of approximately €90 million (unaudited). See note 9 for the Group’s definition of adjusted EBITDA.