Valpak directors propose management buyout

The companys chair and executive director, the Rt Hon John Gummer (Lord Deben), who was responsible for creating the UK’s PRN system, wrote to all the companys compliance scheme members on Monday (August 1). He asked them to sacrifice their legal ownership of the company. This would be in exchange for an initial cash consideration of 170, with a further possible consideration of up to 270.

The main reason given for the move was the change in government policy to focus more on voluntary agreements and responsibiltiy deals as opposed to further regulatory legislation, which has traditionally been the core focus of Valpaks work.

This, the company said, was particularly the case when it came to packaging waste, for which it said it was uncertain if any recycling targets would be set beyond 2012.

As a result, the company said it needed to diversify its business and would need to raise funds which was difficult under its existing structure.

The uncertainty and risk that these changed conditions introduce will leave Valpak needing additional access to capital which our structure does not easily allow, explained Lord Deben.

After careful consideration of all possible options, the Independent Directives decided that it is now in the best interests of Valpak, its customers and its staff to change a structure that relies on members funds, to the more conventional limited liability company, which gives access to external capital to enable future service development.

Business

Under the deal being proposed, the business of Valpak would be transferred to a newly formed company, Valpak 2011. This company would then be acquired by Hamsard, a company 100% owned by four members of Valpaks senior management team and its four executive directors Lord Deben, chief executive Steve Gough, policy director Adrian Hawkes and finance director Philip Gale.

Two meetings are being held at Valpaks company offices in Stratford on August 18 to consider the restructure, at which members can cast their vote. The court meeting is being held to consider the reconstruction scheme, immediately followed by an Annual General Meeting which will consider special resolutions to implement the reconstruction scheme.

If Valpak owners approve and the court sanctions the schemes, the company expects the changes to be effective sometime in late August or early September 2011.

The cash consideration being offered to Valpak members has been based on the audited net assets of the company on 31 December 2010 (2.072 million) minus a change if value of its Stratford office and the potential 1.125 million cost of closing its packaging waste compliance business in the event that the PRN system ceases with the completion of the 2012 compliance period.

PRN system

In the event that the PRN system does continue, with recycling targets set for at least the 2013 compliance year, Valpak said that this money would be released and the conditional deferred consideration of 270 paid to members.

Valpak was the first scheme established to help businesses comply with the Packaging Waste Regulations in 1997. The company has grown to become the UK’s leading packaging compliance scheme, with a 50% share of the market and now also offers compliance to producers under the Waste Electrical and Electronic Equipment Regulations and the Waste Batteries and Accumulators Regulations.