Eyeing unprecedented growth in the personal care sector, global packaging provider Rexam is to acquire China beauty packaging business FangXin Limited.
UK-based Rexam, which has been expanding its beauty packaging capabilities in recent years, says that the deal will cost a total of £42 million (€61.2m) for all assets including the company's production facility based in the Fengxian district of Shanghai.
Rexam is expecting the acquisition will be earnings enhancing from the outset and that the transaction should be completed by the first quarter of 2006.
FangXin manufactures lipstick cases, compacts and pumps as well as mascara cases and is a major supplier to the rapidly expanding market throughout China.
In the last four years, its sales have grown at a compound growth rate of about 30 per cent a year, which outstrips even the huge growth in both the general economy and the personal care sector.
Currently China GDP is continuing to grow in excess of 10 per cent, but increases in the personal care sector easily out strip this figure.
According to research firm Kline & Company, the cosmetic and toiletries market in China increased 13 per cent from 2003 to 2004, with the country's share of the $147.4 billion (€120.4m) global market coming in at $7.1 billion at the manufacturers' level, accounting for nearly 5 per cent of total sales.
FangXin has been investing heavily in the expansion of its production capabilities in recent years. In 2003 it implemented a $37.5 million project to improve technology, expand production capacity and develop a facility dedicated to the manufacture of mascara and pump-based products.
It has been estimated that in 2005 FangXin broke even on sales of $33 million and had net operating assets of $69m.
Rexam has had a presence in China since 1998, where, once the FangXin acquisition is complete, it will have a total of nine Plastic Packaging plants serving the beauty industry and one beverage can plant.
"The production facilities will provides us with the opportunity to manufacture new products as well as providing futher vertical integration for our operations," Rexam spokesman Andrew Mills told CosmeticsDesign.com.
"With these new facilities, we will be supplying both the Western market together with the growing needs of the domestic market," he added.
Lars Emilson, Rexam's chief executive said that the acquisition was another step in the company's plans to expand its global plastic packaging operations.
" The Chinese beauty packaging industry is becoming increasingly important globally," Emilson added. "The acquisition of this well invested company broadens our product range and provides us with new capabilities that will further improve our customer offering."