M&A Announcement

Nov 25, 2020

Good morning, and thank you for joining us today. I hope you're well in this time of raising numbers of COVID cases. My name is Samuel Sigrist. I'm the CFO of SIG and also the Chairman of our JV in the Middle East. I'm joined today by Abdelgani Eladip, our COO of our JV in the Middle East. Today, we are very excited to announce the acquisition of the remaining 50% of our Middle East JV, SIG, combibloc or Baycom, which will give us full operational control over the business and allow us to consolidate a highly attractive growth business with a very attractive financial profile. As a result, we will be able to further expand in the fast growing region of Middle East and Africa and to further build out our position with the global blue chip FMCG players present in the region as well as, of course, leading regional producers. At the same time, our partnership with the Allo Bacon family will continue. STO Bacon Investment Group will hold approximately a 5% stake in SIG and given his industry and regional expertise, Abdallah Alobekan will be nominated as member of the Board of Directors of SIG. Today, we would like to provide you with more details on the transaction as well as more insights into the exciting market and our business in the Middle East and Africa region. We look forward to taking your questions after the presentation at an audio Q and A session hosted by Roald Stengel, our CEO Abdul Ghani Eladib and myself. As many of you know, SIG is a leading system and solutions provider for aseptic cotton packaging solutions. We are one of only 2 truly global players in this highly attractive segment. Our razor razorblade business model has enabled us to achieve consistent growth over the years, and today, we have an aseptic carton share of 21% globally. Around 2 thirds of our sales are in liquid dairy, which also includes alternatives to cow milk, such as vegetable or grain, nuts and seed based milks, but also yogurt drinks amongst others. Our end markets proven to be very resilient throughout many crises, also this year when the world has been hit by the COVID-nineteen global pandemic. We operate at the entry level when consumers in the developing regions move to processed and packaged food in the non discretionary segment, and our customers use our solutions to pack food products that are consumed daily. Our installed base of around 12 50 fillers in field, including the ones in the JV, are placed at the heart of our customers' operations. We have a global footprint with a significant presence in all regions. Over the past decade, we have grown the business from a European centric business into a truly global business, generating about 44% of our revenues in EMEA, about 38% in APAC and about 19% in the Americas. Geographic expansion has remained a priority since our IPO back in 2018. As a result, we opened our tech center in China in 2019 to cater for the fast innovation cycles, which we see in the APAC region. And in order to ensure not only customer but also consumer proximity. We also announced the construction of a new leaf plant in China as a response to the growth we have seen in the APAC region. The plant is expected to come online as planned in Q1 2021. At the end of November 2019, we acquired Wizzi Cartons, our only licensee, which gives us a direct presence in Australia and New Zealand and exposure to the growing dairy export market from those countries into Asia. Hence, the acquisition of the remaining 50% of the Middle East and Africa joint venture is an obvious continuation of the strategy, which we have been pursuing for some time. I know this region well having visited it many, many times, also given my role as the Chairman of the JV. And I have always been impressed by its great dynamism and the huge opportunity which this region represents. Some of that dynamism comes from young and growing populations in countries where GDP per capita is on the rise. This is accelerated by urbanization, disposable income growth and a change in lifestyle and related consumption habits towards processed and packaged food, where our aseptic carton packaging solutions play an important role. As you know, aseptic does not require cool chains, and our cartons perfectly meet the logistical requirements of the developing world. We see a particular opportunity in liquid dairy where per capita consumption still lags well behind developed economies. Liquid dairy products will remain in high demand in this region, also as a result of increasing protein demand. The JV has significantly expanded its presence over the last 19 years. It is today present in 17 of a total of 70 countries, covering a little more than 45% of the region's population. In many of these markets, our aseptic carton share is below the regional average. This shows just how much potential there is for us going forward. Before we talk a bit more about the potential, let me run you through the key aspects of the transaction. SIG will acquire the remaining 50% of its Middle East JV for a total consideration to be paid at completion of €167,000,000 in cash plus a fixed number of newly issued SIG shares, corresponding to approximately 5% fully diluted ownership of SIG. The cash component of the consideration will by available cash balances, and our leverage will remain broadly unchanged. We expect to complete this transaction in Q1 2021, subject to customary closing conditions. As mentioned earlier, Abdallah Anubeykan will be nominated for election to the Board of Directors of SIG at the next Annual General Meeting, which will bring additional regional packaging sector and food and beverage expertise to our Board. So why does this transaction make perfect sense for SIG? It enhances our geographic presence in a region with strong growth prospects. According to the market study we published at the time of the IPO, Middle East and Africa after Asia Pacific is the fastest growing region with expected growth rates of 5.5% to 6%. In specific countries and categories, that growth can be significantly higher. In addition, we are acquiring a well invested footprint in terms of both fillers in field as well as sleeves production plant. Abdelghani will talk more about our state of the art plant in Riyadh, which we complemented in 2017 with an extrusion line and which today covers all manufacturing steps of the sleeves production. We acquire a footprint, which would take many years of significant CapEx to build up organically. We will be able to serve global accounts in a better way, and we will also have the opportunity to move closer to the customers and consumers in the region in order to create value through our consumer centric innovation and by delivering to the market sustainable and affordable food packaging solutions in line with our responsibility agenda. The acquisition allows us to get full operational control over the business. And as a result, we will consolidate a sizable business with a very attractive growth and financial profile. The consolidation of the business in the Middle East and Africa region will also provide greater transparency to you in our financial statements about the performance in the region. And we'll move the focus away from lagging indicators such as cash collected dividend to the metrics of revenue and earnings growth as well as cash conversion similar to our other regions. A fully consolidated Middle Eastern business gives us the opportunity to deploy cash flows at an attractive return on capital employed. The transaction will be accretive to free cash flow per share as well as to earnings per share from year 1 post acquisition. The leverage of the combined business will be broadly unchanged versus SIG today. As we have seen, over the last 10 years, we have deliberately expanded our presence in growth regions outside Europe. And today, Asia Pacific and the Americas represent over 55% of our sales. With today's transaction, we will further diversify our global presence. And on a pro form a basis, about 2 thirds of our sales will be in growth regions outside Europe. Middle East and Africa will represent approximately 14% of our revenues and will be reported as a separate segment. While we will fully consolidate the business with approximately €300,000,000 the external sales of the combined business will go up by approximately €200,000,000 as approximately €100,000,000 of today's sales made by SIG to the Middle East and Africa JV will become intercompany sales. Given the favorable macro trends in the Middle East and Africa region, the combination will create a higher growth business with access to new and attractive markets. This acquisition will further strengthen our margin and our ability to generate cash. On the top left of this slide, you see the SIG adjusted EBITDA margin We expect the ongoing high level of profitability of the Middle East and Africa business also to be accretive to margin in 2021, the 1st year of acquisition. The transaction will also contribute to increasing the rate of cash conversion, which is already at a solid 73%. Overall, the combination creates a more transparent business with a strong margin and cash flow profile. It is entirely consistent with our strategy at SIG of growing the business while maintaining a rigorous focus on returns. This journey started nearly 20 years ago in 2,001 with our first factory opening in 2,005, which is actually the year I joined SIG and the year I met Abdallah Alobeikhan, the CEO of our JV partner, Obaycan Investment Group. OIG has strategic interests across a number of industries with a strong foothold in packaging and strong local business knowledge. The full investment in the extrusion plant in 2017 now allows us to produce our own laminated board, and we are able to supply our customers with a wide range of SIG cartons. We have built a very diversified customer base, including blue chip FMCG customers like PepsiCo, Coca Cola and Danone, And of course, regional players, including Almarai and Kinley. Altogether, we have more than 70 customers with around 190 fillers in field. I think this is evidence that SIG Technology and Solutions are recognized and valued in the region. The JV has delivered rapid growth and has grown profit even faster. We generated revenue CAGR of 14% and an EBITDA CAGR of 24% over the last 15 years. This thanks to the deployment of SIG's razor razorblade business model. On average, we have placed 13 new filling lines every year since 2004. And recently, we accelerated growth in South Africa and have increased our share of wallet with existing customers, while at the same time winning new ones in the region. With a special focus on liquid dairy given the resilience of the category. We are also expanding our presence into food while maintaining a strong position in non carbonated soft drinks. We are very confident that under the full ownership of SIG, the Middle East and Africa business will be able to take advantage of many new opportunities while continuing its strong track record of financial performance. Let me now hand you over to Abdel Ghani. Thank you, Samuel. Let me start by saying how excited I am about the joint venture becoming a full member of the SIG family. Please allow me to introduce myself. My name is Abdel Rani Eladib. I joined SIG Combibloc, Obican 4 years ago, and I bring more than 26 years of expertise with top FMCG companies in the region. My experience at SIG has been exciting so far. What is fascinating to me is the technology behind every pack, ensuring it's healthy, tasty, safe and available in supermarket shelves. What we do here is impactful in so many ways. The collaboration with SIG has always been very fruitful. And I'm convinced that the integration represents great opportunities and will allow us to accelerate the success that we've delivered so far. Let me first describe the main trends driving growth in the Middle East Africa region. The global market for aseptic carton packaging is expected to grow at a CAGR of 3.5 to 4%, whereas in the Middle East Africa region, we have a stronger forecast growth rate of 5.5% to 6%. Samuel already mentioned the key drivers, population growth, rising disposable incomes, convenience and urbanization. But in addition to those, it's important to remember that purchasing power in many countries is still quite low compared with developed markets. This means that affordability is very important. The SIG system with its ability to change over carton size and format very quickly is ideally suited for customers catering to consumers that do not have yet the purchasing power of the Western world. And now more than ever, especially given the current pandemic, food safety and health are top of mind for customers and consumers. A septic carton is the perfect packaging for countries with hot climates and limited refrigeration possibilities. This is particularly key in liquid dairy. Liquid dairy has been our strategic focus to build on already strong presence in the important juice market in this region. You can see examples of our recent dairy expansions on the right of the slide. This remains a key strategic priority because milk is an important and cheap source of protein. So it's a big opportunity in this region as people become able to afford better nutrition. Per capita consumption of milk is the same as in the Asia Pac region, which is less than 10% of the consumption in Europe. So think of the opportunity in a region with the fastest growing population, which accounts for 22% of the total globally. And keep in mind that within the region, there are already significant differences. In Nigeria, for example, they consume less than a glass of milk per capita per year compared with the regional average of 3 liters. So the opportunity is huge. Today, we're number 2 player with a 25% aseptic cotton share. The 11% share represented by other players is very fragmented. This is a great result, as it's the same share as SIG has in Europe, where the company has been present for many decades. It shows just how rapidly we've grown built on the expertise and local knowledge of the YG Group. Today, around 63% of our volumes are liquid dairy compared with less than half 5 years ago. We have a well balanced geographic split across the different subregions. And at the same time, we are seeing lots of opportunities in the significant white spaces, given that there are 50 plus countries in the region where we are not yet present. Our regional footprint consists of our manufacturing hub in Riyadh, and our sales and service offices in 10 countries. I'm proud that the Riyadh plant meets the highest global standards, which is a great addition to the SIG supply network. So let me give you a tour of our factory, where the high standards will shine through, including for safety and quality. The standards have been recognized regionally and globally, as you will also see in the video. Product safety and quality as well as environmental and safety management are essential requirements for us to satisfy the needs of our customers. Over the years, the SIG combi block obaycan plant in Riyadh, Saudi Arabia has received several safety awards and accreditations from global awarding bodies. It has achieved world class environmental safety and operational performance and continues to meet the latest global standards of excellence. In 2018, the plant was awarded the prestigious King Abdul Aziz Quality Gold Tier Award bestowed by the Saudi Arabian government. Based on international standards, this is considered to be the most important Saudi award for operational excellence. It honors the best performing plant for achieving the highest standards of quality. In 2019 and in recognition of the world class quality of its operations, the plant in Riyadh became the 1st system supplier in the region to attain an AA plus rating for food safety from the British Retail Consortium Global Standard for Packaging and Packaging Materials. This rating represents the highest achievable certification for production excellence. In 2020, while continuing to upgrade its operations, the plant celebrated several more awards, including the SIG CEO Safety Excellence Award, won for the 3rd time after achieving more than 2 and a half 1000000 working hours without a lost time incident. Riyadh also became the 1st SIG plant to be certified to the new ISO 45,001 work safety standard. The plant is among the 1st in its industry to complete the said export it in Saudi Arabia, obtaining the highest certification score for maintaining social sustainability and operational standards. These global certifications demonstrate that our production and packaging systems adhere to food safety legislation and maintain the highest standards of hygiene and quality. They underpin the confidence our customers have in our company and in the products we deliver to them. Our outstanding plant in Riyadh serves a diversified customer base across the region. We very much appreciate how loyal our customers are. Our top 10 customers have been with us for more than 10 years. Roughly 60% of sales comes from market leaders, number 1 or number 2, which underpins the resilience of our business. As you can see, we're well established in both liquid dairy and non carbonated soft drinks. And we are now gaining a firm footing in food as well. For example, our customer are constantly expanding into food categories and just recently launched bachamel sauce, tomato puree and other dressings. This is thanks to the strength of our technology and the quality of our service that the customer expanded their business with us. We're well positioned to capture growth in this region. Our innovation enables our customers to meet emerging consumer trends. Pioneer Foods in South Africa was one of the first companies outside China to launch combismile in response to the trend towards on the go consumption. Pioneer also has the Drinks Plus option, which is SIG's unique technology of allowing the filling of particulates such as cereals and pieces of fruit. In Nigeria, we introduced a small and affordable carton for evaporated milk. Previously, evaporated milk had only been sold in cans, and there had been no innovation in the segment. This new format is very successful, and the trend of replacing can with carton is now being rolled out to other West African countries, including Ghana, a new market for us. El Marai, the Saudi company is the largest vertically integrated dairy company in the world. We have 100% share of wallet with this customer, supplying cartons in all three categories, liquid dairy, non carbonated soft drinks and food. But our offer goes way beyond just cartons. Let me show you a video on how we have helped Mirai to significantly improve their production and improve machine performance at their factory, delivering better efficiency and utilization. At Almirall, we are always striving for operational excellence. We began a discussion with SIG, combiBLOC, Obican to implement a customized solution with the goal of increasing workforce efficiency. We took on this challenge to improve Almaray's total system output. While leveraging the existing tools we have and implementing customized methods, we focused our efforts on eliminating losses. With implementing the manufacturing excellence solution, we were able to deliver results while leveraging the power of digitalization. In the Q1 of 2020, we deployed a team of 6 people on top of the customer dedicated 14 engineers to the LRI plant in Saudi Arabia. Solution implementation began by highlighting the elements that were preventing production from operating at optimum performance. One of our requests to this IT company block of a can was that our machine had to continue operating, especially during Ramadan. By fully utilizing our digital tools, we were able to make great improvements. In this case, the productivity has increased by 5%. The overall line utilization has increased by more than 30% compared to August 2019. The main contributors to this enhancement the reduction in technical losses and machine downtime and improvements in preparation time. Asset Performance Management or APM via the use of the SIG Plant 360 system gave us a day to day insight into the operations and allowed us to understand filling line health in real time. Our field service management reports have been a key element in understanding performance in spare part consumption, thereby allowing better allocation of our field service engineers and spare parts. Automated daily reports by the reliability center robots Remote support by SIGCOM block of icon is a revolutionary new way to receive assistance remotely. Our team of experts simultaneously utilize live data and augmented reality tools to solve technical problems. This was a massive advantage during the corona lockdown when there was no access to the plan. We would like to praise the team that has serviced Almirall. We appreciate the commitment that has fully demonstrated a real partnership with a world class supplier. Our complete solutions beyond cartons are recognized by existing and prospective customers. In conclusion, this transaction makes perfect sense. Given the opportunity the region presents and our leading presence underpinned by a state of the art plant. And given our long history and shared DNA, I'm confident that the integration can't be but seamless. Thank you, Abdel Ghani. We are indeed very excited about this opportunity to expand our presence in Middle East and Africa. We gained full operational control over a business with strong growth prospects, driven by macro trends and white space opportunities. The innovative solutions, which differentiate SIG from competitors, are already proving their worth in the Middle East and Africa region. This is a high quality asset. We know the business and the people well, and we expect a seamless integration. The transaction will accelerate growth and increase profitability for the combined group. We will maintain a high level of return on capital employed, sustained by the widened opportunity for our razor razorblade business model. Thank you very much for listening today and we look forward to taking your questions. The first question comes from Lars Kielberg from Credit Suisse. Please go ahead. Thank you. Just first question really comes back to some of the growth prospects, of course, looking pretty good. At the same time, you're looking at your annual reports in 2015, this has been at moderate to declining top line by around 2% per annum. So if you can comment a bit what has been happening and why this would change at this moment. And considering the growth prospects, if this happens to be a particularly opportune time to acquire the business? Also, you haven't shared with us any sort of debt you may assume in the transaction. So if there's any such, please let us know what that is. And the final point, I guess, you're talking about higher cash conversions, etcetera, and potentially lower CapEx needs in this business versus SIG legacy. Why is that different? And what sort of CapEx to revenues do you expect in this business? And I guess the final point, what is the difference between the €290,000,000 you're talking about now and broadly speaking, a €380,000,000 you generated in this 2 KVs in terms of revenues as presented in 2019 annual? Thanks a lot for your questions, Lars. Maybe to tackle them in the order how you asked them, I hope I got the full first part. There was a bit of a noise at our end. But I think you asked around your question was around the growth profile that we see. And obviously, there is Middle East as a market, and you remember the study that we published at the IPO, which is the 2nd fastest growing market for our products for the aseptic beverage and food carton after Asia Pacific. While Asia Pacific is expected to grow at 6% to 7 percent, the region Middle East and Africa is expected to grow with 5.5% to 6%. I mean, we are particularly delighted that with this transaction, we get full control over this 2nd fastest growing market. And there are a number of metrics from my perspective that describe this opportunity from a growth perspective very nicely. Number 1, if you look to our presence today in the region 5%, which is on a similar level like we have in Europe, where we obviously have a very long lasting presence. But I think that speaks its testimony to the team, what the team did. But also, you can imagine that in these 17 countries, we do have also markets with lower share. So that means, per se, the 25, suggests that there is ample room for us to grow, but also the markets where we have a presence but are subscale is another opportunity. And then we do, obviously, have the opportunity to enter new geographies, new white spot geographies within this territory. 1st and foremost, and we talked about that earlier, it's Pakistan, but it's also Sub Sahara Africa, which offers a number of opportunities, whether that's Ghana, whether that's Kenya. So they're very attractive market for us to enter. And I think the team in the region as well as our global team, they have a track record of establishing a presence in the new market and developing new markets. I mean, the second question, I believe, was around timing. And maybe at the end, you can clarify whether I covered all your questions. But the second question My question was really about the contraction you've seen in revenue over the past 5 years or so in this business, which has been about 2% per annum on the Kegar vest. So and that's what I meant the timing of, are we now at an inflection point where that growth will start to come through? Yes. I think that was one of your points also that you had later on, the €290,000,000 versus the €380,000,000 So what you see in our financial reporting historically, what we disclosed were the revenues of both entities. But there is a lot of intra group revenue between the Saudi factory and the Dubai sales entity. So if you add up those numbers, you get two numbers that obviously show obviously also the intercompany sales between the 2 So really what the business is about, it's a business with give or take €290,000,000 external sales. And that hasn't contracted, that has grown. You might remember there was 1 year in the history of over or close to 20 years of the existence of the JV, that was 2018, where we did see headwinds and where the top line did grow slightly into decline. But the team was able to get back on a growth trajectory, right, with 2019 numbers and continues to write that even in the current COVID environment. And Abtir Gani can later comment on that. We talked about the fact that we did grow at 6% constant currency in the 1st 9 months of the year. And I think that's a testimony to what we just discussed before that there is ample room for us to grow in the region. And as such, we don't find the timing odd and I think that I hopefully that clarified that the top line development question. So there is really indeed growth for basically 20 years apart from that one outlier year. And the timing, obviously, is a function also of 2 parties coming together. And I believe Abdallah, Aloveycan and his family, they deemed it now for them the appropriate time to elevate basically the partnership to a new, so to speak, global level. I'll take from now your other questions and then we may clarify other points. You asked for the debt profile. The debt profile of the JV and we talked about at the end of 2019 is in that form that we have a leverage of broadly one time EBITDA or that is net debt of, give or take, €90,000,000 that we have in this combined entities of the JV. The cash conversion is a bit better than our group, as you have also seen probably in the deck that we shared before, which is a function also of CapEx requirement for the rear plant and upfront cash generation of the business. And so we believe that it's going to be a positive addition to the group also from a cash conversion perspective. The CapEx needs, just to follow on on that, we see at this point no reason why we would need to change our midterm guidance, which talks about this 8% to 10% net CapEx of top line growth that we need to sustain our top line growth. And that also would include any additional investments into Riaz plant and the filler base in the region. You have seen the video before. I think it comes across, at least in my mind, very clearly that this is a well invested footprint that we acquire, €190,000,000 190 Fillets in fields, most of them from the latest generation, plus the state of the art Riyadh factory, including an extrusion line, which went on stream in 2016, 2017. And that obviously is the well invested footprint. And maybe and that leads me to your last question, €290,000,000 versus €380,000,000 I think we clarified these revenue numbers by now. So the external sales is indeed €290,000,000 However, if you look to what it's going to do to our group profile, we're going to add, give or take, this €300,000,000 external sales. But on the other hand, you may remember that our EMEA segment did show what we supplied into the JV so far, and that is about €100,000,000 So we add €300,000,000 external sales of the Middle East and Africa business, but we also internalize €100,000,000 of supply into the JV, which now will become intercompany. So that explains why our pro form a statement is going to show a net increase of, give or take, 200,000,000 of revenue. And if you look to the EBITDA perspective, we're going to and you saw here the LTM EBITDA of €80,000,000 if you deduct the, give or take €20,000,000 cash collected dividend, so we're going to add another €60,000,000 EBITDA to the group. So that's what it does from financial profile perspective. I'm happy to clarify any point that wasn't clear. That's perfectly clear. And this is again, to your point earlier, this is clarifying your accounts. And it's a good thing, generally speaking, for an investor side, I would assume. So thanks again. Thank you, Lars. Thank you. The next comes from Jorn Ifeck from UBS. Please go ahead. Hello, gentlemen, and thanks for taking my questions. The first one would be, please, on the return as capital free cash return as capital. If my initial calculations, I'm not totally wrong. The investment of the €480,000,000 you are spending roughly is around 5%. Free cash return on capital yield, I mean, this is significantly below, of course, your group average. What can you do in terms of cost savings, any synergies when you are the 1% owner to really significantly improve here the free capital and capital in this region in the next couple of years? The second question please, can you remind us of the book value the joint venture has And also a historic spendings CapEx, etcetera, was really share fifty-fifty. And then really the last question, sorry, I did not fully get this in your previous answers. What was really the operational turmoil you had here 1 or 2 years ago? And how did you fix it? Thanks very much. Thanks for your questions, Jern. Maybe just start with the first one, the return on capital, respectively. I think you put it now as a return on investment of the acquisition, but I think the way we look at it is the return on capital employed, similar to what we have as a key metric in our group. And you're familiar with the fact that in SAG Group, we look at the post tax return on capital employed of, give or take, 24%. And at this stage, I think we should say JV has similar return metrics because, obviously, it's the same business model that we also pursue in the Middle East. And that's why we are very excited that, obviously, we add with 1 transaction a business of we talked before about the external sales of net CHF 200,000,000 external sales had similar financial characteristics, very attractive characteristics as the rest of the group. Imagine if you would need to build that organically, how long it would take and how much CapEx it would need to build this state of the art factory in 190 fillers in field. And I think if you triangulate, I think it makes sense the transaction also from an overall total consideration perspective. But then it provides us fully consolidated now the opportunity to deploy our strong cash flows in a region with similar return characteristics because again it's our raise to raise business model. And that's how we look at it. I mean from a synergy perspective, obviously, we're going to integrate the Riaz factory into our broader network, and there is an aspiration as we have that with all our plants to continue to drive operational excellence. But in the end, it's not a synergy driven acquisition. It's an acquisition for growth and for an expansion of our consolidated financial statements by taking full control now of an entity that it's so far not consolidate. I think on the book value of the of our share today, Keep in mind, we do have a historically driven number, which is the equity accounting method there, which is not in relation to the current consideration. But the CapEx question is concerned whether it really was paid fifty-fifty. I mean, the CapEx was financed out of cash flows of the JV entities. We talked before about the net debt level, which is rather moderate. So absolutely, I think the CapEx was financed out of the cash returns that the business in the Middle East provided. And with regards to your operational the question on the operational turmoil 2018, I'm happy to elaborate on what happened back then. I will also say it's more market driven than an operational turmoil, and I think also turmoil is probably a big word. But at the point in time when we disclosed our 2018 numbers, we looked at the business for the full year 2018 in Middle East, and I'm talking about the external sales of the JV, that were slightly in decline. And that obviously was a surprise shortly after the IPO. It was also a surprise to management, and we had also there a very weak Q4. What has happened back then? We were maybe I'll label it that, overexposed in chews. And chews in the Middle East, we look at it as a bit of a less resilient category. That's why since then we have done a lot in dairy and did also win a lot of share in dairy. And what has happened in 2018 to some degree was the perfect storm. There were some economies that were down because of a low oil price. There was local currencies that were soft versus the half currencies, and that does on the juice side drive up input cost for the juice products because a lot of the citrus fruits imported out of Brazil and obviously, all the larger producers are U. S. Dollar denominated. And with local currency being weak, those input costs went through the roof and that did affect consumption. And then the other one was and we discussed it extensively. Central banks started to impose some restrictions in terms of customers that we had. They signaled to us they want to place orders and buy, but central banks didn't open up the flow for LCs. And as you're familiar with the fact, we only do business in dollar and euro in that region, and that is true up and until today, and it's going to be true going forward. We weren't able to trade. And that, I think, was a perfect storm. But fairly quickly, the team could prove that, that was a dip and brought the business back on the growth trajectory. And since then, and I think they came across also in Updegram as part before, has significantly gained market share in dairy, which we believe is a fantastic category to play in within this growth market. Very helpful. Many thanks. Thanks, Jern. The next question comes from James Rhodes from Barclays. Firstly, on growth. In the presentation, you say that packaged food from 2020 to 2025 is expected to grow at 10%, but the demand expectation for the region overall is 5.5% to 6%. I'd just be interested in your thoughts there as to why it's lower than sort of broader category overall. Secondly, could you give us some color on the type of packs you most commonly sell in the region and what you think the market will trend towards in the future? And then thirdly, growth wise, what do you think you can do now that you couldn't do before with it being part of the broader consolidated group? James, I also want to give up to Ergani the chance to tackle these questions. Maybe, Ergani, if you want to go first. Okay. So I'll Can you hear me? We can hear you, Abdul Gani. Very good. So I'll take the questions on the So I'll take the questions on the format. So we're very well balanced between the small portion, mainly the 200 milliliters and the mid size format. So you can say roughly 60% small format to 40 percent midsize format. But on categories Sam will very much emphasize on the last question on the accelerated strategy to push liquid dairy, which really proves how resilient it is. I mean Sam will talk about that we've accelerated that last year, we closed the 64% liquid dairy and it was roughly less than half 5 years ago. And this year with COVID, this actually proves that how resilient is day. So now we're even pushing that further and it's on the edge of even 70%. That's mainly on the packs and on the categories. Thanks, Mr. Ghani. I think also your first question, James, on the pace of how septic is expected to grow. I think, obviously, there are different ways to slice and dice the market. We believe that within the more broader category of liquid food and also then when it comes to septic, the carton is the fastest growing substrate. But also, you may remember what we discussed in the context of India. There are other forms of processed and packaged foods that also operate at these entry levels are really at the point where people with increased disposable income can start to buy this processed and packaged food. And there are some other solutions also for non liquid food. And that obviously is normally in the maturity curve of the market. The market goes through 1st before the netceptic comes, and I think that's the Spirit 1 should look at the 10%. And I think it just underlines really the need of the region for processed and packaged food solutions, and that is going to be, obviously, also what is the driver of our category. I think what is going to be different, and that's your third question going forward, what can we do differently from a market go to market perspective or strategy perspective as now as we own the business fully. I think the business was also in the past well integrated with SIG and our approach. That said, if you think about global accounts, which definitely have a presence also in the region, there is maybe now the possibility and opportunity to work a bit even closer to integrate with the Global Account Management better. Another way is that our global functions, including new product development as well as R and D, will automatically move a bit closer to the region, Middle East and Africa. And as we have a consumer centric R and D approach that will also allow to take the needs of the consumers in this region more on board so that we can tailor more and more solutions also for these attractive markets. I would say that's maybe 2 aspects to consider. That's great. Thanks very much. Thanks, James. The next question comes from Christian Aker from Stetel share in the EMEA region, which you show on Page 18, I think. And I wonder if you could share how the situation looked like maybe 10 years ago, where your share was and where especially the other share was from the other players? And what do we expect going forward this 11%? Yes, is that going down to a level we see in the European region like 5%? Yes, what's your assumption here? Thanks for your question, Christian. I mean, I can't remember by heart where the share was 10 years ago. But as a matter of fact, what we have experienced in Middle East, Africa is the similar pattern that we see in all these markets where we're present. I mean, 10 years ago, that was halfway basically the existence of the business, our presence in the region. So we were, on all accounts, growing. We started our journey out of the Arabian Peninsula more into North Africa. Back then, the presence in Sub Sahara Africa was basically not existing. And also, we were rather on the rise in North Africa as we started the business really in Saudi itself and the opportunities that we saw there. So there's definitely, if you think about the industry structure back then, a much bigger share that sits with Tetra. I think you referred to this 11%, which is probably worth to elaborate. It's really a number of very small players. And there you see a very fragmented landscape. And obviously, going forward, we have all the aspiration that we demonstrated in the other geographies to continue to outgrow the market with, again, not by differentiated differentiation through price but through our differentiated technology. And I think there are many aspects how we can prove that. We just talked before about how we did gain share in dairy, another aspect, which is still not yet on the level that we have it obviously in Europe or also North America is food. But we do see attractive project opportunities where with our technology we can make a difference in liquid food as obviously the ability to pack particulates is a distinctive advantage and that's where we see more opportunities also going forward. Would it be fair to assume that you are taking market share more from the orders than from your large competitor? I would say the others and we had discussed that also in the context of China. As you may remember, others often play in a kind of application field that we label as high acid. This can be ready to drink tea segment. This can be very watered down juice, so areas where the aseptic safety is less critical. So I think it's very fair to say we're going to take share going forward from both. But as you see that in other markets, there's obviously Tetra Pak is the main competitor if you look into those categories where we play and that we deem attractive. And then more technical question. You expect transaction to close in Q1. Would it be more at the beginning of the year or more towards end of March? We need to go through some customary processes, including some antitrust filings. I have a hard time to predict that now, whether that's going to be the early or the later part of Q1, but the aspiration is to close in the Q1. Thank you. Thank you, Christian. The next question comes from Daniel Koenig from Mirabaugh Securities. Please go ahead. Yes. Hi. Thanks for taking my questions. I have some very simple questions. I was wondering why your other joint venture partner is actually selling. It makes so much sense for you, higher margins. You're enhancing your growth by far. I'm just wondering why your partner is selling. And then I had another question. Is there do you have a reason why the competition, the others is that the share is so much smaller than in Europe? Do you have a simple answer to that question? Thanks. That's it. Thanks, Daniel. I mean, the why now question, obviously, ultimately can only be answered by our partner. But we did work together very closely, and we have a shared set of values that was kind of the anchor point of this cooperation. I think it was a truly fifty-fifty joint venture, not only by the legal terms, but also by the spirits how we did run the JV. And as these talks now came up with regards to this transaction with our partner. I think the CEO of our joint venture partner of OIG, Abdallah Alobeykan himself, was very clear that he sees the natural home for the business in Middle East, Africa with XIG. And I think probably a number of factors have driven the why now. The business by now has reached a scale, and you saw that in the deck, it's going to be 14%, 1 4% of the combined business going forward, which is a similar size almost like our Americas segment. So the business has reached a scale where obviously, the management of the region is a bit different, and he felt that the full integration in in SAG is the right point in time. And he also was the CEO for 19 consecutive years of successful growth. And obviously, at one point, everyone has a little bit of right to also advance. And I think that probably a number of factors came together. But on the other hand, we are absolutely delighted about this opportunity as we do see the perspective that we've discussed before, the growth profile, the financial, as you say, the financial attractive financial profile, but also the well invested footprint. Now with regard to competition, I would say that the structure is not so different than what you see in Europe, so pretty comparable. And as I said before, the 11% is just probably even more fragmented than it is in Europe, if that answers your question, Daniel. Okay. Thanks. Thank you. The next question comes from Alessandro Foletti from Octavian. Please go ahead. Yes. I was wondering, again, coming back to Ovecan selling, and I understand there's a lockup also to for some period on its share. But I received this morning in my calls a couple of pushbacks, I have to say, on this transaction because they say, well, you say the growth rate was 14% over the 19 years, but it obviously was less than that in the last 10 years probably. So maybe the story is coming to an end for them. I understand. Thanks a lot for your question, Sandro. You're absolutely right. There is a lock up. There's a lock up for 50 percent of the shares for 2 years and a lockup for the other 50% of the shares for 1 year. And I think that itself is well above market standard in such a transaction. And from our perspective, really underlines the commitment that the joint venture partner has and the desire to become a partner now as a strong shareholder on a global level. I mean, every time the structure changes like it does in this instance, people start to look for the reasons, right? I just described it to the earlier question, that's really how we think about this opportunity. Of course, any business that and you see that the 14% growth CAGR goes back 15 years out of history of a 20 year of a business. Of course, in the early years, the growth is much faster than maybe a business that gains market share over time. But that said, we are fully convinced that we're going to continue to see very attractive growth rates out of the region and that Cergy will be able to develop the business along the lines as we are in the rest of the world. I mean and with regard to the timing, I think I answered that aspect before, but I don't think and this is underlying for the commitment that OIG had a desire to get a compensation or positive consideration in shares. There is, on both sides, continued conviction about the opportunities in the region. Right. Maybe as a final question on this subject. Obecan obviously has a joint venture also with Elopak. Do you see many conflicts potential conflicts of interest now because of that or not at all? So I think I'm not the one to comment on what the current status is of that JV and whether in what form that is existing today. But you're absolutely right. Prior to us establishing a JV with them, they already had a JV with AlloPac back then. And overall, these years, I think in terms of size between these two businesses, SAG was by far the more significant business to the family. And I would even dare to say the stake in SAG going forward is by far the more important stake than the fresh business that they operate in the region. There were no conflicts of interest in the past, and we don't think and also the agreements that we entered into are going to make sure that there are no conflicts of interest going forward. Again, our partner is absolutely committed to see the SLG business in Middle East and Africa thrive also going forward. Great. Thank you. I have 2 more, if I may. One is on the sealers. The way I understand it, so far, the joint venture has been buying the fillers, I. E, the way I think of it, you shouldn't have a lot of fillers that have been placed by leasing. Is that something that may change? And if yes, will it have changed? May you be able to grow faster if you start leasing? But then again, do you need more CapEx? Can you give more? Yes, you're right, Alessandro. We did sell as SIG the fillers to the JV. And the JV is deployed similar to how we deploy fillers. They co invested and had the filler regardless of the sale and lease model because of substance over form with the same accounting on its balance sheet. Now going forward, and that was what we had so far as external sales, give or take EUR 100,000,000 that I say we're going to internalize. We're going to see the similar from an accounting or financial perspective, the similar value flow as we see with our other regions. We're going to continue to build fillers in China and Germany, and they're going to be deployed in the region. The only difference is now that we fully consolidate the balance sheet of the Middle East and Africa business. I think from a market opportunity perspective, you're right that they are depending on the region, there is either a preference for sale or lease, but we find combinations in all the territories where we operate. I don't think that that is going to change in any way the dynamic as we're going to continue to adhere to our strict hurdle rates that we also apply in the broader group. Great. Thank you. My last question, I was wondering, you mentioned spots you may be willing to target? Well, first of all, Pakistan is definitely a very important market for the joint venture. However, over the last 90 years, let's not forget the fact that we've leveraged much many more attractive opportunities in other countries. You've seen our success coming from 0% to 25% in 19 years, which is really remarkable. This does not mean that Pakistan is not in our radar. It is in our radar and we're working in the coming, let's say, horizon to gain food in there. In Ghana, similarly, it's an attractive market and you've heard about story, our story in Nigeria, which we talked about dairy, dairy resilience, and we talked about conversion into evaporated milk. This has signed similar traction, and we are on the edge of getting close in Ghana to the end. Does this answer your question, Alessandro? Partially. I would have preferred to have a list of 6, 7 countries. Yes. Maybe the second target country you didn't come across very clearly acoustically is I think Pakistan definitely a market. I think Ghana definitely I think, after Gandhi referred to an opportunity in Nigeria. But also equally, Kenya is a big market there, and there are also opportunities that we see not because only from the market perspective, but also because of the partners we have there in Botswana, I mean, just to name a few. But you see there is an opportunity angle on Sub Sahara Africa besides the Pakistan, which is a huge market. And I will talk with you about and our presence in South Africa, which we came in 5 years from almost 50% to more than 30% And now South Africa has displayed a lot of export opportunities to help us also invade lots of opportunities in the lower parts of Africa. So white market is definitely a good target for the SIG complete block of ICANN. Great. Thank you very much. You're welcome. Thank you, Alessandro. The next question comes from Sandeep Piti from Morgan Stanley. Please go ahead. Thank you for taking my questions. I have just 2 left. One is a clarification. If the transaction goes through, should we expect mid term guidance to be adjusted for Wizzi and joint venture acquisitions? Or you still are thinking of 4% to 6% midterm growth? And then secondly, can you provide us a sense of if there are any provisions? And what is the working capital like in the joint venture? Joint venture? Sure. Thanks for your questions, Sandeep. I mean, from a 2nd perspective, we don't see any reason to change our midterm guidance, but you're familiar with our update cycle of guidance. And we also provide with the year end 2020 more clarity around especially 2021. When it comes to networking capital, you can think of the business in the Middle East and Africa region following the similar profile that you see also in SIG. I think the difference is that there is no factoring program in place as we have it in many parts of the rest of SIG. But at the same time, we're also familiar with the fact that over the course of the year, we do accrue these volume bonuses, which obviously help to compensate net working capital. And also, that's a similar profile that you could expect there. I think also there with regards to our midterm guidance, we don't see a reason to change this 5% to 7% that we have talked earlier about. And I hope that I did answer your questions. Yes. And then just on the provisions, are there any provisions within at the joint venture? No. I mean, there is no provision that is worth to be flagged at this stage here. Maybe also if you refer to kind of the closing mechanism from a 2 day perspective, there are no material net debt adjustments identified, if that makes sense. Perfect. Thank you. Thank you. Gentlemen, as in part, there are no more questions. If there are no more questions, we appreciate your time today. We hope we were able to bring across our excitement and obviously create also similar excitement at year end with this transaction. And with this, we hope to catch up soon, latest for the year in financials, and hope you stay safe throughout the still ongoing COVID situations. Thank you very much for your time today.