Albea Group to Carve Out Tubes Segment After A&E Talks Stall; Q1 EBITDA Up 3% YoY to $44M

Sponsor PAI Partners is looking to split its French cosmetics packaging manufacturer Albea Group in two and sell off the larger tubes segment after plans to amend and extend its €646 million term loan B, or TLB, due December 2027 earlier this year have stalled, sources told Octus.

The tubes segment is being marketed at $100 million annualized EBITDA and prospective lenders to the deal signed nondisclosure agreements, or NDAs, in recent weeks, sources said. Feedback from lenders was due last week, the sources added.

Nonbinding offers are due on June 18, one of the sources said.

PAI Partners is working with Barclays to help facilitate the disposal, sources said. Law firm Kirkland & Ellis was hired by the firm for negotiations with lenders during the A&E process, they added.

This latest carve-out comes after Albea Group sold its beauty and personal care service segment, Innovative Beauty Group, or IBG, to Fremman Capital in early 2024, as reported. CVC Credit provided the debt facilities to support the acquisition.

After trading below 90 in late April, Albea Group’s €646 million 2027 term loan, which pays Euribor+500 bps, was quoted at 92.5 today, according to Solve.

Group Financials

Albea Group first-quarter net sales for the three months to March 31 climbed 6% year over year to $326 million, while EBITDA rose 3% to $44 million. The tubes segment accounted for 57% of group net sales, or $186 million, and 59% of EBITDA after the group’s other main segment, cosmetics & fragrances, saw its EBITDA decline by 8% due to operational inefficiencies in the United States and lower export mix in China and Indonesia. Stripping out one-offs, pro forma group revenue and EBITDA accelerated by 7% and 11%, respectively.

Albea’s net leverage ticked upward during the quarter, with post-IFRS leverage rising to 4.3x from 4.1x, primarily driven by expected seasonal cash movements and adverse foreign exchange shifts, according to sources. While total cash burn was $23.3 million, normalized free cash flow turned positive to $16.1 million, a sharp reversal from the negative $3.1 million recorded in the same quarter last year.

The group has a liquidity cushion of $139 million, made up of $44 million in cash and a completely undrawn $95 million RCF due June 2027.

Appetite for the A&E at the beginning of the year soured when the war broke out in Iran due to the company’s exposure to oil, as an input into plastic, as reported.

In the first-quarter results, management reiterated commentary it gave in its fourth-quarter results that the group was well-placed to deal with disruptions caused by the ongoing conflict in the Middle East, according to sources.

However, sources noted that indirect logistics disruptions from the conflict have spilled over into other regions. Specifically, container shortages and transportation bottlenecks tied to the Middle East shipping environment have pressured profitability at Albea’s manufacturing operations in Indonesia.
 

PAI Partners declined to comment. Barclays and Kirkland & Ellis did not respond to a request for comment.