JZ Capital Partners wants to invest up to about US$20.5m into the Secondary Fund managed by an affiliate of JZCP’s manager. The money would be used to help the Secondary Fund make an investment into a newly incorporated company – Follow-on Flex Pack – that will be a related company of, and incorporated in a parallel structure to, ACW Flex Pack, LLC. Follow-on Flex Pack will make acquisitions that are complementary to the business of Existing Flex Pack. The trust will end up owning about 61.5% of the secondary fund’s 45% stake in Follow-on Flex Pack (or a 27.7% look-through stake).
The existing Flex Pack business is a US-based provider of a variety of custom flexible packaging solutions to converters and end-users. A potential acquisition has already been identified – a full-service paper and film packaging manufacturer and converter. Futher acquisitions are likely.
JZ Capital Partners is supposed to be running off its portfolio and handing back cash to shareholders but it is able to make investments if they are designed to strengthen existing ones to get a better overall price on exit. They are arguing that this is the case here.
Proposed return of capital
Separately, the company says that it intends to commence returning capital to shareholders, initially about US$40m, as soon as possible.
It would do this by redeeming shares which needs the approval of the shareholders. Once this is secured, the return of capital should take place by the end of July 2024.
Further distributions should follow when cash becomes available.
JZCP : JZ Capital proposes follow on investment in Flex Pack and $40m capital return