Packaging business Pact Group Holdings Ltd (ASX: PGH) has responded to market speculation this morning after the Fairfax press reported that it was in talks to acquire Sydney-based Jalco Group for the sum of $150 million.
According to the media company's report, sources speculated that the two companies were in negotiations for several months and that a deal could be reached as soon as this week. In an update to the market, Pact Group confirmed that it is involved in such discussions but that it had not yet entered into any official agreement (nor is there any certainty that a transaction will eventuate).
Jalco was established in 1973 and describes itself as "Australia's pre-eminent FMCG (fast-moving consumer goods) contract manufacturing service provider". FMCG are consumer goods products that sell quickly and at a relatively low cost, often sacrificing margins for volumes.
While Jalco manufactures goods for brands such as Energizer, Castrol and Unilever, an acquisition of the business would enable Pact Group to increase its exposure to the FMCG sector.
Since listing on the ASX in late 2013, Pact Group has generated reasonable returns for investors thanks to its acquisitive and organic growth strategy. With its shares currently trading for $4.18 on a price/earnings ratio of 14x forecast earnings together with decent growth prospects, Pact Group could be a reasonable prospect for long-term investors. Want to know more about The Motley Fool's top stock for 2015?
