Guala Closures said it has reached an agreement to take over a South African closure manufacturer as part of a strategy to boost its presence in the fast-growing sub-Saharan African market.
The Italy-based company announced it is to acquire the Metal Closures division of MCG Industries for an undisclosed amount.
Foothold in every continent
A Guala spokeswoman told FoodProductionDaily.com the move was subject to the approval of the South African competition authorities and that a decision was expected by September.
Metal Closures, a division of MCG Industries, is a leading manufacturer of aluminum closures in South Africa.
The business, established in 1959, has one plant in the Paarden Eiland area of Cape Town. It manufactures a broad range of aluminum closures for the wine, spirits, beverage, water and food sectors.
“The acquisition of MCG Metal Closures represents a further step in the strategy of consolidating the core business of Guala Closures," said company chairman and CEO Marco Giovannini, Chairman. “[It] aims to strengthen the Group’s presence in the fast growing sub-Saharan African market.”
Should the transaction be given the green light it will also give Guala a foothold in every continent. There are no immediate plans to expand the division post-completion, added the company spokeswoman.
The current EBIT of MC’s closures was equivalent to approximately 5% of Guala’s total earnings before tax.
Strongest growth in spirits
Andre Barnard, national sales manager for MCG, said he believed there were substantial growth opportunities for the sub-Saharan region.
“The economic situation in Europe and the US is pretty difficult at the moment, so you can see companies from those regions looking to invest in Africa,” he said. “Based on the current inquiries we receive, I believe that the greatest potential for growth lies in the spirit sector. The wine segment, while very strong in South Africa, is less developed elsewhere.”
This matches the market assessment by Guala which told this publication that it too saw sprits as the key growth strand, followed by wines.
Barnard added that poverty throughout the region remained an issue and that there was a need to invest in countries and populations as a whole rather than just thinking about capital expenditure in terms of plants.
“It’s a chicken and egg situation – to create demand for a product – be it a drink or anything else – it is necessary to invest in a country as a whole,” he said. “Once a middle class is created then consumption of products – including alcohol – increases. But returns will come in the medium to long term.”
Neelin Naidoo, CEO of MCG Industries hailed the acquisition as a major opportunity for the closures unit.
“The sale of MCG’s Metal Closures Division to Guala Closures, provides the Division with enormous opportunities to further strengthen its position in the sub-Saharan African market, as it will now be able to draw on Guala Closures’ global expertise,” he said.