U.S. INVESTMENT FUND BUYS INTO GROWING BRAZILIAN BLOW MOLDER

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SÁO PAULO, BRAZIL — Brazilian PET bottle manufacturer SBG Participacões e Empreendimentos SA, which operates under the name Injepet Embalagens, has announced a $100 million, five-year expansion plan.

Injepet also said May 22 that a U.S. investment fund has bought a 49 percent stake in the firm.

South America Private Equity Growth Fund LP, based in New York, paid $16.3 million for the minority share, Gilson Schilis, Injepet's founder and chief executive officer, said in a May 22 interview in So Paulo. Schilis retains a 51 percent share in the firm.

The investment marks the fund's first initiative in the South American plastics sector.

``The PET market presents two positive points in Brazil: the natural increase in soft drink consumption over a base which is already large, and the substitution of glass for PET packaging,'' said Robert Duncan Littlejohn, partner at Brasil Private Equity Ltda., the fund's manager in Brazil.

As a first step in the five-year expansion plan, the fund's financial resources were coupled with another $6 million invested by Schilis to build a plant in Jundia, 40 miles from So Paulo.

Scheduled to begin production in October, the plant will be equipped to injection mold about 12 million preforms per month and blow mold 15 million bottles.

``The gap in preform needs will be supplied by the market,'' Schilis said.

He did not specify what machinery the company acquired to run the project.

The 452,000-square-foot plant will be located right next to a Coca-Cola Co. bottler and in front of a Pepsi-Cola Co. bottler.

``In spite of the plant's privileged situation, it has been designed to fulfill other markets besides the soft drink sector,'' Schilis said.

However, for now practically all of Injepet's production is destined for soft drink packaging. The company claims to be the fifth-largest PET molder in Brazil, with a monthly capacity to produce 36 million preforms and blow mold 42 million bottles. It has a facility in Manaus, in the Amazon area, another in So Paulo's metropolitan region, and two blow molding lines located inside pop bottlers in the Northern states of Para and Rondônia.

Founded three years ago, Injepet registered sales of $5 million in 1994, $35 million in 1995 and $55 million in 1996. The company expects to reach $80 million in sales this year.

To change its client profile to segments beyond soft drinks and reinforce its technological approach, Injepet counts on a strategic alliance signed last year with PET molder Twinpak Inc., based in Dorval, Quebec.

The deal allows Injepet to produce hot-fill, multilayer and lightweight bottles using Twinpak's technology, and borrow available molds from the Canadian firm.

In the soft drink arena, opposite seasons between Northern and Southern hemispheres permit one company to supply the other with preforms during peak consumption periods, prior to and during the summer period.

Recently, Twinpak sent a team of six technicians to learn and assist Injepet's operations.

``We are bench-marking our processes. Next year, our group will visit Twinpak,'' Schilis said.

Another investment already in progress at Injepet is the expansion of its plant in Manaus, which is doubling to 129,000 square feet to improve the unit's logistics.

By 2001, Injepet expects to install its first PET molding unit in the northeastern region of Brazil.

Littlejohn said it took about nine months for South America Private Equity to complete the deal with Injepet. The investment manager for the fund is WestSphere Equity Investors LP, also based in New York. Its investors include U.S. pension funds and insurance companies, he said.