PRO-PAC PACKAGING LIMITED — Investor Presentation 2017

Sep 10, 2017

ACQUISITION OF INTEGRATED PACKAGING GROUP

11 September 2017

The following disclaimer applies to this investor presentation ( Presentation ) and you are therefore advised to read this disclaimer carefully before reading or making any other use of this Presentation or any information contained in this Presentation. By accepting this Presentation, you represent and warrant that you are entitled to receive this Presentation in accordance with the restrictions, and agree to be bound by the limitations, contained within it. This Presentation has been prepared by Pro-Pac Packaging (ASX: PPG ) in relation to:

• PPG's acquisition of Integrated Packaging Group ( Merger ); and

• a fully underwritten 2 for 3 non-renounceable entitlement offer ( Entitlement Offer ) of new ordinary fully paid shares in PPG ( New Shares ) to be made under section 708AA of the Corporations Act 2001 (Cth) ( Corporations Act ).

Summary information

This Presentation contains summary information about PPG and its activities which is current only as at the date of this Presentation. The information in this Presentation is of a general nature and does not purport to be complete nor does it contain all the information which a prospective investor may require in evaluating a possible investment in PPG of that would be required in a prospectus or other disclosure document prepared in accordance with the requirements of the Corporations Act. PPG's historical information in this Presentation is, or is based on, information that has been released to the Australian Securities Exchange ( ASX ). This Presentation should be read in conjunction with PPG's other periodic and continuous disclosure information lodged with ASX, which are available at www.asx.com.au. Certain information in this Presentation has been sourced from Integrated Packaging Group, its representatives or associates. While steps have been taken to review that information, no representation or warranty, express or implied, is made as to its fairness, accuracy, correctness, completeness or adequacy. Certain market and industry data used in connection with this Presentation may have been obtained from research, surveys or studies conducted by third parties, including industry or general publications. Neither PPG nor its representative have independently verified any such market or industry data provided by third parties or industry or general publications.

Not an offer

This Presentation is not a prospectus or other disclosure document under the Corporations Act and will not be lodged with the Australian Securities and Investments Commission ( ASIC ). This Presentation is for information purposes only and is not an invitation or offer of securities for subscription, purchase or sale in any jurisdiction. The offer booklet for the Entitlement Offer ( Offer Booklet ) will be available following its lodgement with ASX. Any eligible shareholder who wishes to participate in the Entitlement Offer should consider the Offer Booklet in deciding whether to apply under the Entitlement Offer. The distribution of this Presentation (including an electronic copy) outside Australia and New Zealand may be restricted by law. If you come into possession of this Presentation, you should observe such restrictions and should seek your own advice on such restrictions. Any non-compliance with these restrictions may contravene applicable securities laws.

Not for release or distribution in the United States of America

This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. This Presentation may not be distributed or released in the United States. Neither the New Shares nor the entitlements have been, or will be, registered under the U.S. Securities Act of 1933 , as amended ( U.S. Securities Act ) or the securities laws of any state or other jurisdiction of the United States. Accordingly, the entitlements may not be taken up by, and the New Shares may not be offered or sold, directly or indirectly to, persons in the United States or persons who are acting for the account or benefit of a person in the United States unless they have been registered under the U.S. Securities Act (which PPG has no obligation to do so or procure) or in a transaction exempt from, or not subject to, the registration requirements of the U.S. Securities Act and any other applicable U.S. state securities laws. The New Shares to be offered and sold in the Entitlement Offer may only be offered and sold outside the United States in “offshore transactions” (as defined in Rule 902(h) under the U.S. Securities Act) in compliance with Regulation S under the U.S. Securities Act.

Not investment advice

The information contained in this Presentation is not investment or financial product advice or any recommendation to acquire entitlements or New Shares. This Presentation does not and will not form any part of any contract for the acquisition of entitlements of New Shares. Each recipient of this Presentation should make its own enquiries and investigations regarding all information in this Presentation. This Presentation been prepared without taking into account your investment objectives, financial situation or particular needs. Before making an investment decision, you should consider whether it is a suitable investment for you in light of your own investment objectives, financial situation and particular needs and having regard to the merits or risks involved. This Presentation and its contents are provided on the basis that recipients will not deal in the securities or the financial products of PPG in breach of applicable insider trading laws.

Future performance

This Presentation contains forward looking statements and comments about future events, including PPG’s expectations about the performance of its businesses and the effect of the Entitlement Offer on that business. Forward looking statements can generally be identified by the use of forward looking words such as, “expect”, “anticipate”, “likely”, “intend”, “should”, “could”, “may”, “predict”, “plan”, “propose”, “will”, “believe”, “forecast”, “estimate”, “target” and other similar expressions. Indications of, and guidance or outlook on, future earnings or financial position or performance are also forward looking statements and include statements in this Presentation regarding the conduct and effect of the Entitlement Offer and PPG’s outstanding debt. You are cautioned not to place undue reliance on any forward looking statement. While due care and attention has been used in the preparation of forward looking statements, forward looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends which are based on interpretations of current market conditions. Forward looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance and may involve known and unknown risks, uncertainties and other factors, many of which are outside the control of PPG. A number of important factors could cause PPG’s actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements, including the risk factors described in the “Key Risks” section of this Presentation. Actual results, performance or achievements may vary materially from any forward looking statements and the assumptions on which statements are based. PPG disclaims any intent or obligation to update publicly any forward looking statements, whether as a result of new information, future events or results or otherwise. The forward looking statements are based on information available to PPG as at the date of this Presentation. Except as required by law or regulation (including the ASX Listing Rules), PPG undertakes no obligation to provide any additional or updated information whether as a result of new information, future events or results or otherwise.

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TRANSACTION OVERVIEW

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Details

• Pro-Pac Packaging Limited (“ PPG ”) has entered into an agreement to acquire Integrated Packaging Group Limited (“ IPG ”), the leading engineered flexible films packaging producer in Australia for consideration of $177.5m (“ Merger ”)

  • IPG consideration comprises $117.5m in cash and $60m in PPG shares payable to Vendors (Funds managed by Advent Partners Pty Ltd (“Advent Funds”)[1] and IPG senior management)

  • IPG acquisition multiple of 7.6x Pro-forma FY18F EBITDA of $23.2m[2,3]

• Merger is highly complementary and delivers a scalable platform for future growth

• PPG Pro-forma FY18F Revenue $472m; Pro-forma EBITDA $37.7m; and Pro-forma NPAT $18.4m post-transaction[2,3]

• Expected to be 18% EPS accretive on a Pro-forma FY18F basis[2,3]

• Impact

  • FY19 and FY20 EBITDA growth underpinned by organic and segment growth; ongoing cost synergies and cross-selling opportunities with bolt-on acquisitions

 The Transaction will be funded by:

• $54.8 million fully underwritten 2 for 3 non-renounceable entitlement offer at $0.34 per share

Funding

• $60.0m vendor placement of 158.4m shares at $0.379 per share (premium to entitlement offer price)

• $70.0m additional debt

 Transaction conditional on shareholder approval

1 APC I Pty Ltd in its capacity as trustee of the Advent V Trust A and APC II Pty Ltd in its capacity as trustee of the Advent V Trust B

2 Inclusive of $2.0m in near term pre-tax synergies, tax effected at the NPAT line

3 IPG Pro-forma earnings excluding the timing impact of gains relating to capital investments

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Merger of Pro-Pac and IPG to create a leader in the growing flexible manufacturing and distribution segment

• A diversified distribution company, providing innovative, flexible and rigid packaging solutions for a group of blue chip clients and a broad range of SME

• Services FMCG, industrial and logistics markets, amongst others through the provision of primary and secondary packaging solutions

• Pro-Pac has distribution facilities in Sydney, Melbourne, Brisbane, Adelaide & Adelaide supplemented by 6 manufacturing sites

• Australia’s largest specialist manufacturer and distributor of flexibles, film, wrap and associated products

• Services both agricultural and industrial markets focusing on Australia’s leading FMCG, food, retail customers

• Established in 1982: 34+ years operating experience

• Manufacturing facilities in Melbourne, Sydney and Perth in Australia, and Auckland NZ with growing export capability

• Over 24 years operating history

FY18F revenue

EBITDA[1]

FY18F revenue

EBITDA[2]

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$15.3m
$14.5m
$12.2m
26%
30%
44%
Rigid Industrial Flexibles
FY16A FY17A FY18F
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$21.2m
$18.1m
$12.7m
100%
Flexibles
FY16A FY17A FY18F
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1 PPG FY16 and FY17 underlying EBITDA excluding acquisition and relocation costs 2IPG Pro-forma EBITDA, FY18F adjusted downwards for the timing of capital investments

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	Merger Rationale
	Strong platform for organic growth growth and acquisitions • World class manufacturing and proven product innovation capability • Opportunities for geographic expansion • Highfree cash flow generation • Bolt-on acquisition~~s~~ opportunities
	Leadership in flexibles • Positioned to capitalise on growing flexibles market • Resilient and favourable consumer trends
	• Combination of PPG’s distribution and IPG manufacturing delivers a highly efficient and seamless packaging system • Complementary blue-chip customer base with no material crossover • Significant cost synergies and cross selling opportunities identified Extended capability; greater efficiency
	Strengthened Board & Management Team • Rupert Harrington to join PPGBoard from completion of the merger • John Cerini to lead PPG Industrial & Flexibles Division from completion of the merger

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Pro-Pac will be a leading player in the $2.2 billion Flexible Packaging segment

Australian Packaging A$20-22 billion[1] Flexible Packaging Fibre Packaging Metal Packaging Other Packaging ~$2.2 billion[1]

• The Combined Group will be a segment leader in primary (trays and films), secondary (shrink wrap) and tertiary (stretch wrap) industrial packaging solutions

• Demand outlook for flexibles is attractive (~4% long term growth)

• Trend towards engineered films as substitutes for inferior forms of secondary packaging

• Productivity benefits for customers

• Shift towards convenience packaging

• Technology constraints in existing packaging solutions

• Advances in product quality

• The Combined Group will be a leading distributor & manufacturer of other packaging and industrial products

• Customers value suppliers in this segment for their ability to provide a total solution for all their packaging requirements

• Products in the sector include:

• Washroom materials

• Tape & Strapping

• Cartons & Void fill

• PPE

• Packaging machinery (including pallet wrapping)

• Bottles, jars, containers, caps & fasteners

1IBISWorld and PPG management estimates

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• PPG future growth to largely be driven by flexible market

• Flexible segment growing faster than GDP and the overall packaging sector

• Flexible packaging industry in Australia estimated to be worth $2.2bn p.a

• Blown film and bags (IPG’s market) estimated to be worth $1.0bn p.a

• MAP/PET/PP Trays, soaker pads & liners, film

• Demand expected to grow 47% over next 10 years (CAGR 4%)[1] . This is underpinned by:

• Shift towards convenience packaging

• Move towards unitisation to reduce product wastage

• Move towards shrink wrap as a substitute for crates and boxes

• Top 3 players in flexibles account for 65% of industry revenue and target different end-segments

• Amcor – Focus on FMCG (snack foods, confectionary)

• Sealed Air – Focus on meat, dairy and other technical segments

• IPG – Focus on industrial, selected FMCG, logistics, agriculture, horticulture

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1IBISWorld and PPG management estimates

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PRO-PAC POST TRANSACTION

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$37.7m $18.4m FY18PF EBITDA[1] FY18PF NPAT[1] Pro-Pac standalone FY18F: Pro-Pac standalone FY18F: $14.5m $6.7m

Pro-Pac standalone FY18F: $14.5m

3.3c 10.4x FY18PF Basic EPS[[1]] FY18PF P/E Ratio[2] Pro-Pac standalone: 2.8c 2.0c 5.9% FY17 Dividend Yield[2]

3.3c FY18PF Basic EPS[[1]] Pro-Pac standalone: 2.8c

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Pro-Pac Standalone New Pro-Pac
FY18e revenue FY18e revenue
21%
Distributor and
43% Innovative
57% manufacturer
79%
Distribution Manufacturing Distribution Manufacturing
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2% 1%
World class
8% [4%]
manufacturer
without
geographic
constraints
100% 86%
Australia Australia NZ ME NA Rest�of�World
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1 PF = FY18 pro forma forecast. IPG Pro-forma EBITDA excluding the timing impact of gains relating to capital investments. Inclusive of $2.0m in near term pre-tax synergies. 2 At Entitlement Offer price of $0.34

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The new Pro-Pac has the ability to manage all of a customers needs

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Manufacture – 6 plants
Distribute – 16 warehouse facilities
Primary Packaging Secondary Packaging Tertiary Packaging
Products Products Products
Example: Supply of fresh produce
Thermo-form
Cartons Pallet wrapping
trays
Lidding film Tape Angle boards
Retailer Consumer
Pads Envirofill Machine strap
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China  Sourcing Office Australia  11 Manufacturing Plants  7 Distribution Facilities  Integrated recycling Canada Malaysia  1 Distribution Facility  Shared Services  1 Sales Office

New Zealand

• 1 Manufacturing Plant

• 1 Distribution Facility

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Pro-Pac will have manufacturing and distribution capacity within existing major metro facilities

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Sydney
Brisbane
Warriewood
PPG Production facility
IPG Production facility
Kings Park Geebung
PPG Distribution centre
IPG Distribution centre
Wetherill Park Acacia Ridge
Chester Hill
Loganholme
Stapylton
Kirrawee
Perth
Adelaide
Melbourne
Somerton
Regency Park
Reservoir
Beverly
Laverton
Kewdale
Dandenong
Canningvale
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KEY:

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Pro-Pac will have a stable blue chip customer base with no material crossover of existing customers

No single customer contributes more than 4% of sales

Select blue chip customers include:

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% of sales (FY17a)
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4%
3%
2%
2%
2%
2%
2%
2%
1%
1%
Customer Base
Customers
14%
11-30
65%
Other
Customers
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• Fast Moving Consumer Goods : Arnott's, Blackmores, Coca-Cola Amatil, Foster’s, Goodman Fielder, Heinz, Kimberly-Clark, Kirin, Nestle, Unilever

• Retail – Aldi, Coles, Metcash, Coles

• Agricultural – Elders, Fonterra, Inghams, Parmalat, Primo

• Logistics – Linfox, Toll

• Industrial – Bluescope Steel, Boral, Fletcher Building, Toyota

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PPG has included $2.0m of cost synergies in its FY18 Pro-forma forecast

• Opportunities to realise scale benefits and optimise logistics and supply chain over time

• Opportunities to leverage scale and best practices from each business across procurement function over time

• Consolidation of head office, manufacturing and distribution over time

• Product rationalisation over time

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• Flexibles and industrial market remains fragmented

• Identified pipeline of bolt-on acquisitions predominantly in flexibles and industrials that have:

• Products that are complementary to PPG

• Customer base not currently covered by PPG business

• Easily attainable manufacturing or distribution efficiencies

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• Favourable trends in the flexible food packaging sector

• Consumer preference for unitised fresh food in packaging

• Premium product with increased shelf life for suppliers and retailers

• Provide a broader suite of products to the complementary new customer base through a ‘one-stop-shop’ offering

• Emerging e-Commerce offering

• Expanded machinery products offering to include beginning and end of line equipment

• Continue track record of product innovation

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PRO FORMA FINANCIALS

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Financial profile
IPG EBITDA [2] Combined EBITDA [3]
25 40 37.7
21.2 2.0
35
20 30.3
18.1 30 28.0
25 21.2
15
12.7 12.7 18.1 Synergies
20
IPG
10
15
PPG
10
5 15.3 14.5
12.2
5
0 0
FY16A FY17A FY18F FY16A FY17A FY18F
$M $M
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1 PPG underlying FY16 and FY17 EBITDA excluding acquisition and relocation costs

2 IPG Pro-forma EBITDA, FY18 excluding the timing impact of gains relating to capital investments

3 FY18 Pro-forma EBITDA for the group including $2.0m of near term pre-tax synergies

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Forecast Pro Forma Profit and Loss for the period ended 30 June 2018

		Pro-Pac standalone	IPG1	Pro-forma adjustments2	Combined Group
	EBITDA	$14.5m	$21.2m	$2.0m	$37.7m		Maintenance capex less than
	D&A	($3.5m)	$(3.0m)		($6.4m)		depreciation
	EBIT	$11.1m	$18.2m	$2.0m	$31.3m		$2.0m of cost synergies identified and
							easily achievable
	Net Interest exp.	($1.4m)		($3.6m)	($5.0m)		Interest coverage 6.2x
	PBT	$9.6m			$26.3m		18% EPS accretion
	Tax expense	($2.9m)			($7.9m)		Highly cash generative business
	NPAT	$6.7m			$18.4m
	Shares on Issue	241.8 m		319.6m	561.4m
	Basic EPS	2.8 cents3			3.3 cents
	EPS accretion				18%

1 IPG Pro-forma EBITDA excluding the timing impact of gains relating to capital investments.

2 $2.0m of near term pre-tax synergies, incremental interest on debt drawn for acquisition, and shares issued for vendor placement and entitlement offer. 3 Basic EPS calculated on Pro Pac shares on issue as at 6 September 2017

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Pro forma Balance Sheet

As at 30 June 2017 $m Pro-Pac standalone1 IPG2 Pro-forma adjustments3 Combined Group Cash & equivalents $12.3m $1.3m $13.6m Trade & other receivables $37.7m $38.0m $75.8m Inventories $35.1m $55.9m $91.0m PPE $15.2m $18.5m $33.7m Intangibles $71.3m $111.3m $182.6m Other $8.4m $1.9m $10.3m Total assets $179.9m $114.4m $112.6m $406.9m Trade & other payables $31.4m $41.4m $72.8m Borrowings $29.0m $70.0m $99.0m Other $5.8m $6.8m $12.6m Total Liabilities $66.3m $48.2m $70.0m $184.4m Net assets $113.7m $66.2m $42.6m $222.5m Net Debt $16.8m $85.5m  Post transaction on an Pro-forma FY18 basis:  Net Debt/PF EBITDA of 2.3x  Debt/(Debt+Equity) 30.8%  Target a ND/EBITDA range of 1.5- 2.3x  New $107m term debt and working capital facility to finance acquisition

1 PPG as reported for 30 June 2017

2 Extracted from the IPG management accounts for 30 June 2017 to reflect the assets and liabilities to be acquired (on a cash and debt free basis) 3 Following completion the company will undertake a formal purchase price allocation process

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TRANSACTION FUNDING AND CAPITAL RAISING

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Offer Structure

• Transaction will be funded by:

• $54.8m fully underwritten 2 for 3 nonrenounceable entitlement offer

Offer Price

• $0.34 per share, representing a discount of 10.2% to the 30-day VWAP on 6 September 2017 of $0.379 per share

• Fully underwritten by Bell Potter Securities Limited

• $60.0m vendor placement of 158.4m shares at $0.379 per share (premium to entitlement offer price)

• $70.0m new debt

Transaction Sources

Sources	A$ million
Vendor Placement	$60.0m
Entitlement Offer	$54.8m
Additional Debt	$70.0m
Total	$184.8m

Uses of Funds

	Uses	A$ million
	Acquisition with IPG	$177.5m
	Transaction and offer costs	$6.0m
	Additional working capital	$1.3m
	Total	$184.8m

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• 2 for 3 Rights Issue to existing shareholders – 161.2m shares

• Major shareholder Bennamon Pty Ltd (Kin Group) has committed to taking up its pro-rata rights of $28.1m (82.5m shares)

• Advent Funds and IPG management[1] will be issued with $60m (158.4m shares) on completion of the acquisition

• Escrow arrangements for Advent Funds and IPG management are, subject to certain conditions:

• release of 50% of holdings at FY18 results; and

• release of remaining 50% of holdings at FY19 results[2]

ISSUED SHARE CAPITAL

		Pre Transaction (shares)	New Shares (shares)	Post Transaction (shares)	Post Transaction (%)
	Bennamon Pty Ltd	123.8m	82.5m	206.3m	36.8%
	Advent and IPG management1	0m	158.4m	158.4m	28.2%
	Other PPG shareholders	118.0m	78.7m	196.6m	35.0%
	Total	241.8m	319.6m 561.4m 100%

• 1 APC I Pty Ltd in its capacity as trustee of the Advent V Trust A and APC II Pty Ltd in its capacity as trustee of the Advent V Trust B

2 The holders may deal with up to 100% of their escrowed shares at any time after the FY18 results if the 90 day VWAP of the shares after the announcement of the FY18 results exceeds the issue price of the shares by 40% or more

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Indicative Timetable

Event Date/Time (AEST) Announcement of Merger and underwritten entitlement offer, and trading resumes Before 10.00am, Monday 11 September 2017 Lodgement of Notice of Meeting Tuesday, 26 September 2017 Announcement of Entitlement Offer Tuesday, 10 October 2017 Ex-entitlement date Thursday, 12 October 2017 Record Date Friday, 13 October 2017 (at 7:00pm ADST) Entitlement Offer opens Wednesday, 18 October 2017 Company Annual General Meeting to approve the consideration shares Friday, 27 October 2017 Entitlement Offer closes Monday, 30 October 2017 Deferred settlement trading Tuesday, 31 October 2017 Shortfall notice issued to underwriters Thursday, 2 November 2017 Settlement of Entitlement Offer shares Friday, 3 November 2017 Issue of consideration shares Monday, 6 November 2017 Completion of Merger Monday, 6 November 2017 Commencement of trading of Entitlement Offer shares Tuesday, 7 November 2017

Timetable is indicative only and PPG reserves the right to amend the dates in this presentation at its discretion and without notice, subject to the ASX Listing Rules and Corporations Act

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KEY RISKS

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General risks

Investment Risk: There are risks associated with any investment in a company listed on the ASX. The value of shares may rise above or below the current share price depending on the financial and operating performance of PPG and external factors over which PPG and the Directors have no control. These external factors include: economic conditions in Australia and overseas which may have a negative impact on equity capital markets; changing investor sentiment in the local and international stock markets; changes in domestic or international fiscal, monetary, regulatory and other government policies and developments and general conditions in the markets in which PPG proposes to operate and which may impact on the future value and pricing of shares. No assurances can be given that the New Shares will trade at or above the Offer Price. None of PPG, its Board or any other person guarantees the market performance of the New Shares.

General Economic Conditions: Adverse changes in economic conditions such as interest rates, exchange rates, inflation, government policy, national and international economic conditions and employment rates amongst others are outside PPG’s control and have the potential to have an adverse impact on PPG and its operations.

Liquidity risk: There may be few or many potential buyers or sellers of PPG Shares on the ASX at any time. This may affect the volatility of the market price of PPG's shares. It may also affect the prevailing market price at which shareholders are able to sell their PPG shares.

Taxation: Future changes in taxation law, including changes in interpretation or application of the law by the courts or taxation authorities, may affect taxation treatment of an investment in PPG shares or the holding and disposal of those shares. Further, changes in tax law, or changes in the way tax law is expected to be interpreted, in the various jurisdictions in which PPG operates, may impact the future tax liabilities and performance of PPG. Any changes to the current rates of income tax applying to individuals and trusts will similarly impact on shareholder returns.

Major Shareholder Risk: PPG currently has a substantial shareholder on its share register. There is a risk that this shareholder, future substantial shareholders, or any other large shareholders may sell their shares at a future date. This could cause the price of PPG shares to decline.

Risk of Dividends Not Being Paid: The payment of dividends is announced at the time of release of PPG half year and full year results as determined by the Board from time to time at its discretion, dependent on the profitability and cash flow of PPG’s businesses. While PPG has a stated dividend policy, circumstances may arise where PPG is required to reduce or cease paying dividends for a period of time.

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Operational risks

Competition risk: PPG operates in highly competitive markets, dealing with large sophisticated clients who regularly competitively review all supplier arrangements. The loss of any customers may negatively impact earnings . Additionally, the risk from increased competition and new alternative packaging products may negatively impact on sales and profitability.

Key input costs: PPG has a number of key input costs including resin, labour and energy. An increase in the prices of any of these inputs may have a negative impact on costs and profitability

Currency risk: An investment in PPG will include indirect exposure to currency fluctuations. The impact of foreign exchange rate fluctuations is mitigated by the purchase of forward foreign exchange contracts, holding suitable levels of inventory and through price adjustments passed on to customers. If PPG’s hedging strategies are not successful, PPG may experience financial loss. As an domestic Australian manufacturer,

Loss of key personnel: PPG’s performance depends significantly on its key management personnel managing and growing its business and responding to customers’ needs. The loss of such personnel or any delay in their replacement may adversely affect PPG’s ability to develop and implement its business strategies and ultimately adversely affect PPG’s business, operating and financial performance.

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Acquisition and Offer risks

Underwriting risk: PPG has entered into an Underwriting Agreement under which the Underwriter has agreed to fully underwrite the Offer, subject to the terms and conditions of the Underwriting Agreement. The Underwriter’s obligation to underwrite the Offer is conditional on certain customary matters, including PPG delivering certain certificates, sign-offs and opinions. Further, if certain events occur, some of which are beyond PPG’s control, the Underwriter may terminate the Underwriting Agreement, including if:

• the acquisition does not proceed for a number of reasons including if the acquisition does not complete or there is an event of default under the debt facility agreement or the acquisition agreement is terminated, the agreement is amended, varied in any respect, breached, rescinded or terminated;

• there are certain delays in the timetable for the Entitlement Offer, without the Lead Managers’ consent;

• there are certain financial or economic disruptions in key market or hostilities commence or escalate in certain key countries;

• there is a change in the board or certain senior management changes;

• an adverse change, or an event that is likely to lead to an adverse change, occurs in the assets, liabilities, financial position or performance, profits, losses or prospects of PPG or the PPG Group from that disclosed to ASX up to, and including, the Announcement Date; or

• a voting intention statement made by a shareholder in relation to voting in favour of the Merger withdrawn or a Major Shareholder (as defined in the Underwriting Agreement) sells or transfers any of the shares they hold or control or acts contrary to their voting intention statement and a condition specified in that voting intention statement is triggered or satisfied.

The ability of the Underwriters to terminate the Underwriting Agreement in respect of some events will depend on whether the event has or is likely to have a material adverse effect on the success, marketing or settlement of the Offer, the value of the securities, or the willingness of investors to subscribe for securities, or where they may give rise to liability for the Underwriters. Termination of the Underwriting Agreement would have an adverse impact on the amount of proceeds raised under the Offer and could affect PPG’s ability to pay the purchase price for the IPG acquisition. PPG would need to find alternative funding to meet its contractual obligations under the acquisition agreement to pay the purchase price. Termination of the Underwriting Agreement could materially adversely affect PPG’s business, cash flow, financial performance, financial condition and share price. If the Underwriting Agreement is terminated and PPG is unable to source alternate funding, it may be unable to complete the Merger.

The Entitlement Offer is not conditional on completion of the Merger. In the event that the Merger does not complete for any reason, Pro-Pac will consider options in relation to the use of funds raised. In the event that the merger does not complete for any reason, the Underwriter is entitled to terminate its obligation to underwrite the Entitlement Offer.

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