Malaysian packaging manufacturer Scientex Berhad’s wholly owned subsidiary Scientex Packaging Film has signed a sales and purchase agreement to fully acquire Klang Hock Plastic Industries (KHPI) for MYR190m ($48.5m).

With the acquisition, Scientex Berhad is set to become a regional hub in the flexible plastic packaging (FPP) market.

Founded in 1976, KHPI manufactures custom films such as shrink films, polyethylene (PE) films, tubes and bags, lamination films, stretch films, stretch hoods, agriculture films and flexitank films.

The company operates two manufacturing plants in Klang, Selangor, with an annual capacity of 99,000mt and sales of close to MYR400m ($102m) per annum, compared to Scientex’s manufacturing revenue of MYR1.7bn ($434.6m).

“These would certainly sharpen our competitive edge, as we propel Scientex to be a regional leader in the FPP market.”

KHPI has a global customer base of more than 450 multinational corporations, spanning mainly across the food and beverage and fast-moving consumer goods (FMCG) sectors.

Around 40% of the company’s films are being exported to customers in the Asia-Pacific, Australia, Europe, Mauritius, the Middle-East, New Zealand and the US.

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It is reported that the acquisition comes with a profit guarantee of MYR18m ($4.6m) before tax for the 12-month period to 31 March 2019.

The acquisition is expected to be financed with internally generated funds and bank loans.

Scientex Berhad managing director Lim Peng Jin said: “With the acquisition of KHPI, our manufacturing segment will see a leapfrog in revenue to exceed MYR2bn ($511m) per year. This will not only strengthen our position in the global FPP market, but also immediately expand our capacity, product portfolio, and clientele reach.

“Additionally, we see vast opportunities for the enlarged entity to enjoy synergistic benefits from operational efficiency, as well as product innovation initiatives.

“With the new production facilities, we aim to enhance our services and provide prompt and timely delivery to our global customers through our enlarged operations in multiple locations. Overall, these would certainly sharpen our competitive edge, as we propel Scientex to be a regional leader in the FPP market.”

The acquisition of KHPI is expected to increase Scientex’s total annual output capacity by 30% from the current 356,000mt to 455,000mt.