2017-10-20

Toppan Leefung’s New Family Member – Darui Packaging


After a long search of over three years for an acquisition in the packaging business, we finally found Shanghai Darui Packaging Co., Ltd, a flexi packaging company. Negotiations with its owner and founder successfully culminated in a signed Sale & Purchase Agreement on 8 November 2017. Shanghai Darui Packaging Co., Ltd (“Darui Packaging”), officially joins the Toppan Leefung family and opens up a new business sector for our Group!

In March this year, Mr Chia Yan Heng was given the mandate by Mr Yeo Chee Tong, our Group CEO to spear-head the search for packaging- related M&As. I had the privilege to assist and participate in the whole process of acquiring Darui Packaging and I take this opportunity to share my experience with you.

We initiated communications with Darui Packaging in June this year. In the three months before we had travelled to Hunan, Hubei, Tianjin, Chongqing, Shanghai, Zhejiang and other places in China to visit potential targets for acquisition in the packaging industry. For various reasons however, none of them culminated in a signed Memorandum of Understanding (MOU). This made me realize how challenging our M&A search had been in the past three years.

In June, an intermediary put us in touch with Darui Packaging, a soft packaging company that specializes in medium and high-end pet food packaging bags. We met with the founder of the company, Mr Li Daobian, several times. His sincere attitude and down-to- earth working style made our communications go smoothly. On 15 July, Mr Yeo met up with him for the first time. The valuation of Darui Packaging, acquisition offer and other important issues were negotiated, confirmed and the MOU was prepared for signing. It was at this point that we encountered our first obstacle in the M&A process – the current factory site of Darui Packaging is to be reclaimed by the local government for development purposes and Darui Packaging will have to relocate within next six months. Parties discussed this matter over the next two months before coming up with four possible solutions. The MOU was finally signed on 8 September. Shortly thereafter on 12 September, a due diligence team comprising personnel from finance, audit, legal, HR, production and other departments was set up to study, evaluate and compare Darui Packaging’s corporate set up and operations. This was not an easy task, especially for Marie (Leefung Group’s Internal Audit VP) and her team who had to gather information in the day, analyze them and prepare reports in the night on a daily basis. Fortunately, with a lot of co-operation from Darui Packaging staff, this daunting task was completed within a week and the final report was submitted to Tokyo HQ.

Over the next month or so, we had many rounds of discussion with the Darui Packaging team on issues that surfaced during the due diligence process. These included environmental protection issues, patent issues, etc., all of which were satisfactorily resolved in the end. Mr Yeo Chee Tong, Group CEO and Mr Chia Yan Heng then went to Tokyo to present this acquisition proposal to Toppan’s Board of Directors for approval. Toppan’s Board gave its approval to acquire Darui Packaging on 26 October. Mr Yeo immediately informed Darui Packaging’s founder and set up an appointment to sign the Sale & Purchase Agreement on 8 November.

Reflecting on the whole process with all its uncertainties in the past five months, I believe it was our perseverance, wisdom, sincerity and show of good faith that gave the owners and management of Darui Packaging confidence to trust us. I also believe that Darui Packaging will strengthen and grow with help and support from its new family, the Toppan Leefung Group.