SIG plans IPO and listing on SIX Swiss Exchange
SIG Combibloc Group (“SIG” or the “Company”), a leading provider of aseptic carton packaging solutions for the food and beverage industry, announces its intention to launch an Initial Public Offering (the “IPO”) and to list on SIX Swiss Exchange
- A global leader in aseptic carton packaging systems and solutions with exposure to growing and resilient end-markets
- Distinctive business model combining proprietary filling technology with additional services
- Long-term contracts with diversified blue-chip customer base in the food and beverage industry
- Strategy of continued product and solution innovation to support customer needs
- Proven track record of delivering long-term growth, margin expansion and strong cash generation
- Good growth momentum and a further increase in profitability demonstrated by H1 2018 results
- IPO is a natural next step in the Company’s growth strategy
- Investors can expect dividends in line with strong and increasing cash flows
- New board of independent Directors will be elected, chaired by the designated Chairman, Andreas Umbach
- IPO expected to include newly issued shares targeting primary proceeds of approximately €1 billion
- To further increase the Company’s free float, IPO may also include existing shares held by majority owner Onex (TSX:ONEX) and certain members of Management
- Depending on the size of any secondary share component, Onex is likely to retain a post-IPO shareholding of 50% or more
- Listing on SIX Swiss Exchange planned in the coming months, subject to market conditions
Rolf Stangl, CEO of SIG said: “SIG has a heritage as a Swiss industrials company going back over 160 years. Today, SIG is one of only two leading global system suppliers of aseptic carton packaging solutions. The planned IPO is a natural next step in our growth strategy as we continue to bring innovative products to the market and to expand in existing markets and new geographies. Our strong growth prospects and cash flow profile underpin our ability to reward investors with an attractive dividend policy going forward.”
Global leadership in systems and solutions for aseptic carton packaging
With revenue of €1,672 million and Adjusted EBITDA1 of €480 million for the last 12 months to June 30, 2018, SIG is one of only two leading global system suppliers of aseptic carton packaging solutions. The aseptic packaging process allows beverages and liquid food to maintain their taste, appearance and nutritional qualities for up to 12 months without the use of refrigeration or preservatives. In 2017, SIG had an estimated 21% share of aseptic carton packaging volumes produced for liquid dairy, non-carbonated soft drinks and liquid food applications in its core geographies2. With its precision-engineered filling systems, SIG offers customers a high level of flexibility, with fast change-over times between carton sizes and shape formats, as well as the ability to fill a wide range of products with different viscosity levels and particulates. Through its carton sleeve technology SIG has become a market leader in aseptic carton packaging for liquids with particulates, which include fruit or cereal pieces in yogurts and non-carbonated soft drinks as well as chunky soups. These products have been developed to meet fast-growing consumer demand in a number of SIG’s key geographies.
Resilient end-markets benefiting from secular growth trends
SIG’s customers are principally engaged in selling food and beverage products, which are characterised by resilient, low-discretionary consumer demand and are therefore less susceptible to economic cycles than more discretionary products. Aseptic carton packaging is expected to benefit from secular growth trends in the food and beverage industry, such as rising consumption in developing economies, favourable shifts in demographics towards smaller households, premiumisation and increasing consumer demand for convenience and on-the-go consumption. Other significant growth drivers include greater penetration of ambient packaging in higher-growth developing economies due to the lack of a stable end-to-end cold chain infrastructure, increased food and beverage e-commerce sales and growing consumer health and wellness awareness. These drivers favour convenient packaging that preserves the nutritional value of its content without preservatives.
Proprietary and highly engineered full system offering
SIG is the only global aseptic system supplier with a proprietary, sleeve-fed system that has distinct economic and technological advantages over roll-fed systems and non-system suppliers. SIG’s sleeve-fed system can offer its customers a lower total cost of ownership as a result of the flexibility in changing carton sleeve sizes and shape formats on its filling machines, high overall production uptime and output due to the reliability of its system, and low waste rates both of packaging and the filled product. In addition, SIG’s system has superior capabilities for filling a wider range of liquids with different viscosity levels and particulates than the roll-fed systems with which it competes.
Successful business model with recurring revenue and attractive returns on investment
SIG’s business model is based on its proprietary filling machines at its customers’ facilities, which typically can be used only with SIG’s proprietary sleeves and closures. The Company’s installed base of filling machines supports the ongoing sale of sleeves and closures. As of June 30, 2018, there were approximately 1,150 SIG filling machines in the field in over 60 countries, which filled approximately 35 billion sleeves during the preceding 12 months. In addition, over 550 field service engineers provide customer support either from locations within the customers’ facilities or from widespread on-call service locations, helping to ensure a high degree of efficiency and production up-time.
Long-standing partnerships with diversified blue-chip customer base
SIG is a trusted partner for leading blue-chip customers and for established national and regional food and beverage companies. The Company sells its aseptic carton packaging solutions to over 270 customers worldwide and its relationship with its top ten customers is over 25 years on average. SIG is deeply involved in customers’ product development decisions, providing consumer-led innovation and collaborating in product formulation, as well as testing of new product concepts, with the aim of delivering the “Perfect Package” every time.
Strategy of continued product and solution innovation to support customer needs
Part of SIG’s strategy to drive increased customer demand for its products is to continue to introduce new and improved product and solutions offerings. These cover areas such as point-of-sale differentiation and positioning through new shapes and decorative features, consumer appeal and functionality through improved handling and pouring, and new features such as product traceability and digital marketing solutions. Through its formulation and filling capabilities SIG enables its customers to develop a range of products containing particulates. SIG also continually seeks to optimise the weight, format and design of its carton sleeves and closures, as well as to develop higher efficiency filling lines. Examples of recently launched innovations include the new premium packaging platform combismile, an innovative single-serve solution designed to meet growing consumer demand for on-the-go food and beverage consumption; Heat&Go, the leading microwaveability solution among aseptic carton packs capturing demand for easy-to-prepare warm and hot drinks as well as liquid food; and combiblocXSlim, a small-format beverage packaging providing a low-cost option relative to other substrates.
Resilient financial profile with track record of long-term growth, margin expansion and attractive cash generation
SIG’s attractive business model provides resilient, as well as foreseeable and recurring revenue streams. This resilience is evidenced by its long-term track record of revenue and earnings growth, with high and increasing margins and strong cash flow generation. Between 2007 and 2017, SIG’s revenue and Adjusted EBITDA grew organically at CAGRs of 4% and 7%, respectively. The strong business model coupled with continued focus on operational excellence contributed to an increase of 700 basis points in Adjusted EBITDA margins over the last decade (from 20% in 2007 to 27% in 2017).
Strategies in place for continued long-term growth
SIG intends to continue its record of long-term growth through a strategy of penetrating attractive new geographies and fast-growing niche categories and to pursue new, as well as expand existing, customer relationships. Substantial resources have been committed to improving SIG’s go-to market approach and sales force effectiveness, as well as its ability to offer a variety of high quality aseptic packaging products and solutions across regions. SIG’s expansion into attractive geographies where it has little to no presence today will also help to drive future growth.
Proven management team with successful track record and highly experienced Board of Directors
The Group Executive Board - led by Chief Executive Officer Rolf Stangl and Chief Financial Officer Samuel Sigrist - is highly experienced, with its members averaging 11 years with SIG. Together with the global workforce of approximately 5,000 employees, the management team has a strong track record of growing the business by building long-term customer partnerships, developing new technologies and expanding into high-growth countries. At the same time, the team has increased profitability through a focus on operational excellence, continuing cost optimisation initiatives and investing in higher value end-products and regions.
SIG’s Board of Directors is expected to comprise eight members who all have highly relevant experience and will be non-executive directors. The Board of Directors will be chaired by Andreas Umbach with further independent members including Matthias Währen (expected Chairman of the Audit and Risk Committee); Colleen Goggins (expected Chairwoman of the Compensation Committee); Werner Bauer, Wah-Hui Chu; and Mariel Hoch. In addition, two Onex representatives are expected to be on the board: Nigel Wright (expected Chairman of the Nomination and Governance Committee) and David Mansell.
Contributing positively to society and to the environment across the value chain
Corporate responsibility is at the core of SIG’s operations. The Company aims to pursue a net positive corporate footprint in the long run by contributing more to society and the environment than it takes out. SIG’s EcoVadis Gold status in the supplier sustainability rating put it in the top 1% of 30,000 participating companies in 2017. This rating is based on a detailed independent assessment of SIG’s policies, processes and performance based on specific criteria relating to the environment, society, ethics and the supply chain. SIG strives for certified sustainable supply of all materials, products and services. All of SIG’s liquid packaging board, its main raw material, is purchased from suppliers certified by the Forest Stewardship Council (“FSC”) and, to date, it is the only aseptic carton provider to announce that it offers 100% of its packs with the FSC label on the pack. SIG’s cartons are fully recyclable and have a 70-80% average renewable content. SIG has also launched innovative products such as the EcoPlus pack, which has a 28% improved CO2 emission impact compared to comparable packages in a similar format, and the SIGNATURE PACK, which is the first aseptic carton pack linked to 100% plant-based renewable materials via certified traceability and mass balancing.
Attractive dividend policy
SIG’s goal is to implement an attractive and sustainable shareholder return policy by providing a recurring and sustainable dividend to shareholders. In 2019, SIG expects to pay a dividend of approximately €100 million relating to the financial year ending December 31, 2018. From 2019 onwards, the Company plans a pay-out ratio of between 50% and 60% of Adjusted Net Income3.
The intended IPO is expected to consist of a primary offering of approximately €1 billion. The expected net proceeds from the primary offering are intended to be used to delever the Company’s balance sheet to a target leverage ratio of 3.00-3.25x following the closing of the IPO. In order to further increase the Company’s free float, the base offering may be complemented by a potential offering of existing shares held by its current owners, including funds advised by affiliates of Onex and certain members of management. In addition, a standard over-allotment option is expected to be granted on a number of existing shares.
BofA Merrill Lynch, Credit Suisse and Goldman Sachs International are acting as Joint Global Coordinators and Joint Bookrunners for the planned IPO. Barclays, Citigroup, Morgan Stanley and UBS Investment Bank are acting as Joint Bookrunners, while UniCredit Bank AG and Vontobel are acting as Co-Lead Managers. Rothschild & Co. is acting as independent financial adviser to SIG on the IPO.
(SIG Combibloc Group AG)