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Will Goodpack be Taken Private?

Goodpack Limited (SGX: G05) can be deemed as a one-of-a-kind business in Singapore’s stock market. It is the global leader in Intermediate Bulk Containers (IBCs), an environmental friendly product that can be reused when transporting solid or liquid goods around the world.

On 19 March 2014, Goodpack announced that it was in talks with undisclosed parties for a possible privatisation deal. No more information has been given since until yesterday when The Edge Singapore disclosed that talks were held between Goodpack and Brambles, an Australian pallet maker. After negotiations between both parties failed, two of the largest private equity firms in the world – Blackstone (NYSE:BX) and Carlyle (NYSE: CG) – have now jumped into the fray.

Why is Goodpack special?

Goodpack is a company that an investor like Warren Buffett might be interested in due to the presence of a strong economic moat: By having the largest fleet of IBCs around the world, Goodpack has created a considerable competitive advantage around its business.

Other companies will find it hard to match the product range and distribution reach of the company. Furthermore, with its leasing services, its customers will not be tied up with problems, such as disposal, that come with the use of conventional transportation containers made from wooden pallets or corrugated boxes.

Besides providing an environmentally friendly service, Goodpack has also been able to generate shareholder friendly returns with its return on equity generally being above the 10% mark.

Why would Goodpack want to sell itself?

This is not the first time the company has seeked a possible sale. Back in 2008, Goodpack was out looking for a buyer for its business.

While there might be many possible reasons for Goodpack seeking a sale, being unprofitable is certainly not one of them. In its latest second quarter report, Goodpack’s business seemed to be still doing well with quarterly profits increasing by 12% year-on-year to US$12.5 million. In fact, the company has never been unprofitable in the last 5 years and had been growing its bottom-line steadily since the global financial crisis.

Succession issues also does not seem to be a big driver for wanting a sale as Goodpack’s main shareholder, the 62 year-old Mr. David Lam Choon Sen, had handed over the Managing Director post in 2012 to Mr. Liew Yew Pin.

All told, outsiders can only speculate on possible reasons for Goodpack’s apparent willingness to sell the business until more concrete plans are laid out by the company.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.