MELBOURNE, AUSTRALIA — A proposed merger between two Australian bioplastics companies will create a publicly listed entity with annual sales of almost A$30 million (US$25 million).
Melbourne-based, publicly listed Cardia Bioplastics Ltd. and Melbourne-based privately held Stellar Films Group Pty. Ltd. have reached an agreement to merge, subject to shareholder and regulatory approval.
Cardia managing director Frank Glatz, in a phone interview with Plastics News from Singapore, said merging the companies makes sense because they have worked together for about five years and are both pioneering sustainable plastic packaging products, particularly for the personal hygiene products market.
Glatz is attending Outlook Asia 2014, an international conference for non-woven personal care products in Singapore, where he launched a new film, Cardia Biohybrid, developed in partnership with Stellar.
Glatz said Biohybrid was developed for the personal care/hygiene products industry. It is a mix of renewable thermoplastics, mainly corn starch, and traditional resins, which can include polyethylene and polypropylene. There are eight resins with differing qualities for varied applications.
The proposed merger needs shareholder approval at an extraordinary general meeting, which Glatz expects to occur in late January, and Australian regulatory authorities' approval. Both companies are conducting due diligence
before a deal is finalized.
“Stellar is the more stable business, with significantly higher sales revenue,” Glatz told Plastics News. Cardia posted 2014 sales of A$5 million, although its sales for the most recently completed quarter were A$2.1 million, which is annualized at A$8.4 million. Stellar's 2014 sales were A$21 million.
Cardia was established in 2002 and Stellar has operated for about 25 years.
Cardia said the two companies have cooperated closely over the last three years, and that benefits of the merger include scale and geographic footprint of the combined operations, market access and reach, production and operational savings, complementary intellectual property positions, resources to deliver business strategy and high-quality management teams.
Glatz said the companies considered a joint venture or continuing their close relationship as separate entities but there are advantages in a merger. He said no name for the new company has been developed yet.
Stellar has two factories, in Melbourne and Selangor, Malaysia. Cardia has three factories — one each in Melbourne; Nanjing, China; and São Paulo. Both companies have business development offices and distributors around the globe.
Stellar manufactures films for the disposable diapers, feminine hygiene, incontinence and medical disposable markets, and for packaging surgical instruments, surgical drapes and gowns.
Glatz said the joint development of Cardia Biohybrid involved Cardia developing the technology and Stellar manufacturing the product. While many bioplastics contain 10 to 20 percent renewable content, he said Biohybrid can contain up to 50 percent renewable thermoplastics but still be used in traditional converting applications, like film, injection and blow molding, extrusions and coatings.
The hygiene product market has a lot of potential growth and is seeking more sustainable products, so Stellar and Cardia are a “complementary fit,” he said.
Cardia has just expanded its Nanjing operation, building a new factory that opened in September. Three new production lines began in September and are operating at full capacity; another six film extrusion and bag-making lines are being installed in Nanjing to meet Cardia's order pipeline, in particular for dog waste bags and other waste management products.
Glatz said there is a lot of demand in China for compostable bags, used to dispose of kitchen and green waste. Many city and municipal councils are moving to compostable bags to divert organics from landfall.
He said Cardia is in talks with some San Francisco councils, but will not say more.
Cardia's Brazilian film and bag manufacturing plant opened in September and has capacity for 500 million retail carrier bags a year. Glatz said Brazil also uses the Biohybrid product in retail bags.
Glatz said Cardia has signed a supply agreement with bubble-wrap manufacturer Sealed Air Corp., of Elmwood Park, N.J., to use Cardia compostable films in its new PakNatural Biodegradable Cushion Bags. He would not divulge the contract's value, citing contract confidentiality constraints, but said he is confident “as we go forward it will be a large contract and we will grow with them.”