The Company

Cogitels
Story
2011
The Impact of Private Equity in Emerging Markets:
Achieving Business Results Through Sustainability
Sustainability Case
Study: Cogitel (Tunisia)
Cogitel (short for Comptoir General
dImpression et de Traitement des
Emballages) was created in 1984 by a
number of industrialists from the Tunisian
region of Sfax, and commenced manu-
facturing operations in 1987 under the
capable leadership of Hdi Zeghal, its
CEO. Following several years of growth,
Cogitel expanded its production capac-
ity and quality control systems. By the
late 1990s, Cogitel had launched its
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tion from AFAQ; however, despite these
advancements, the company made a
loss in 1997 following the closure of the
border with neighboring Algeria, which
accounted for an important share of
the companys turnover at the time.
In 1998, TunInvest viewed Cogitels short-term
setbacks as an ideal opportunity for a turn-
around investment. With TunInvests capital
and expertise, Cogitel obtained a new quality
assurance cerIicaIion (lSO 900!:2000) and
quickly reIurned Io proIabiliIy. As Zeghal
and the TunInvest investment team took
stock of the companys successes, they were
inspired to transform the family-owned
business into a regional packaging leader.
To do so, TunlnvesI encouraged Zeghal Io
undertake a leveraged management buyout
Ihe rsI in Tunisia's hisIory: aIer !8 monIhs o
work, Ihe IransacIion was compleIed in 2005.
This enabled TunInvest to partially exit their
iniIial invesImenI in CogiIel, and Ihe Zeghal
family to increase its stake in the company,
a move that would better align interests and
incenIivize managemenI. ln 2006, TunlnvesI,
through its Maghreb Private Equity Fund II,
and Swicorp via iIs privaIe equiIy und lnIaj
CapiIal, joinIly acquired a majoriIy sIake in
a newly creaIed holding company AlIea
Packaging to enable Cogitel to execute a
growth through acquisition strategy. !
Essentials
Company: Cogitel, http://www.cogitel.com.tn/
GP: TunInvest-AfricInvest Group, a leading private
equity house in North and Sub-Saharan Africa
with over US$500 million under management
covering North, Western, and Central Africa
(http://www.tuninvest.com/)
Region: Africa
Country: Tunisia
Sector: Manufacturing
Business focus: Flexible packaging solutions
for the food and beverage industry in North Africa
Size: Revenue US$33.3 million (2010);
209 employees (2010)
Investment: US$1.9m in 1998 (buyout of
Cogitel shares aimed at constituting a core
shareholding base); US$19.5m in 2006 (to fund
acquisition program via Altea Packaging);
TunInvest holds 31.2% of Cogitel through its
stake in Altea Packaging
Impact Highlights
With support from TunInvest, Cogitel has
grown from a family-owned SME with a
highly fragmented equity structure into the
core holding of horth ^frica's leading fexible
packaging manufacturing group
ln the fve years to 2010, Cogitel's revenues
doubled to US$33.3 million, while its exports
grew to 51% of total sales
Cogitel adopted a number of environmentally
sustainable policies to reduce waste and energy
use, generating economic gains in excess of
$675,000 (or roughly 2% of revenues) in 2010
Cogitel has obtained several international
health, safety, and quality assurance
certifcations, these have enabled the conpany
to penetrate European markets and improve its
operating effciency and custoner satisfaction
1987 1994 1997 1998 2003 2006 2007 2008 2010
1987
Cogitel
commences
manufacturing
operations
1994
Expansion of
production
capacity and quality
control systems
1997
Cogitel launches
frst upgrade
program
1998
TunInvest makes
frst investnent
Cogitel obtains
ISO 9002
certifcation
2003
Cogitel obtains
ISO 9001
certifcation
2006
TunInvest makes
second investment
(via Altea Packaging)
Cogitel acquires SIED
2007
Cogitel acquires
French company
Roland and invests
EUR10 million
to create Cogitela
in Algeria
2008
Cogitel obtains
lS0 22000 certifcation
Cogitel acquires Optima
(Morocco), and the
Egyptian companies
Porta and Rotopack
2010
Cogitel is the
leading fexible
packaging
manufacturer
in MENA
Cogitel Company Timeline
! Following its
acquisition of
CogiIel, AlIea
Packaging facil-
itated Cogitels
acquisition of
SlLD, Ihe second
largest flexible
packaging
manufacturer
in Tunisia. AIer
consolidating
the domestic
markeI, in 2007
AlIea Packaging
acquired !00%
of the French
flexible packaging
company Roland,
a move that
would allow Cogitel to expand its prod-
uct range and would grant the company
more legitimacy with multinational clients.
LaIer IhaI year, AlIea Packaging invesIed
more Ihan LUP!0 million in Algeria Io
create a new flexible packaging company,
CogiIela. ln 2008, AlIea Packaging conIin-
ued its growth through the acquisitions of
Ihe Moroccan company OpIima, and Ihe
Egyptian companies Porta and Rotopack.
Since TunlnvesI's iniIial invesImenI in !998,
Cogitel has increased the number of its em-
ployees in Tunisia rom 96 Io 209, while AlIea
Packaging now employs roughly 800 employ-
ees across iIs operaIions in ve counIries. The
Zeghal amily reIains key posiIions Ihrough-
ouI Ihe conglomeraIe: Hedi is Ihe Chairman
o Ihe 8oard, his son Slim serves as AlIea
Packaging's CLO, and his daughIer Nadia
serves as CLO o CogiIel and Tunisia head.
The Role
Played by
Private Equity
Cogitels CEO at the time, Hdi Zeghal,
sought out TunInvest as a GP for
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ment, Cogitel needed to constitute
a core shareholding base in order to
facilitate decision making and stra-
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a highly fragmented capital structure.
At the same time, Hdi Zeghal was
looking forward to the strategic
backing that TunInvest would bring
to the company.
Following the companys turnaround
and Ihe decision Io expand across NorIh
Arica, CogiIel's leadership wanIed Io
leverage TunInvests presence and broad
network of business contacts throughout
the region. These relationships proved
to be critical as Cogitel acting as the
anchor company or AlIea Packaging
grew through a series of acquisitions.
Finally, partnering with TunInvest gave
Cogitel the comfort and security of having
a sIrong insIiIuIional parIner. NoIes one o
Cogitels managers, TunInvest created a
formal strategic committee which brought
informed and rational decision making to
our company through better reporting,
enhanced transparency and governance,
and a sense of urgency. The monthly
meetings were much more effective and
value-creating than board meetings.
In collaboration with
the Tunisian Ministry
of Environment and
Sustainable Development,
Cogitel and TunInvest
undertook a detailed
study of the companys
environmental footprint
and impact. As a result
of this study, Cogitel will
hire an external consultant
in 2011 to develop an
environmental management
system (EMS) in compliance
with international
standards (ISO 14001).
Map of Operations
Employee Growth
900
800
700
600
500
400
300
200
100
0
Prior to
TunInvest
(1996)
Tunisia Tunisia
(Cogitel)
Global
(Altea
Packaging)
After TunInvest
(2010)
+118%
+733%
800
209
96
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Increasing Cogitels Value
Through Sustainability
Cogitel achieved a number of value-creating
environmental objectives throughout
TunInvests involvement with the company.
Prior to TunInvests investment, Cogitels
environmental policy was focused on
reducing its amount of source packaging
(product inputs) and waste production.
While these were laudable policies,
TunInvest used its strong relationship with
company management to expand Cogitels
environmental initiatives even further.
Cost Savings
During his rsI siIe visiI llyes Abdeljaoued,
TunInvests environmental consultant, noticed
IhaI CogiIel had a small solvenI (volaIile organic
compound (VOC)) disIiller whose capaciIy was
insucienI Io IreaI all solvenIs used in Ihe
plant. Untreated solvents may cause respiratory
problems and liver or kidney damage. With a
view Io reducing Ihe concenIraIion o VOCs,
Cogitel installed a device that supplied fresh air to
employees and extracted solvent-laden hot air. !
New Markets
TunInvest brought sophisticated knowledge
of how to penetrate new markets. It recognized
IhaI aIIaining inIernaIional qualicaIions,
such as a qualiIy assurance cerIicaIion or
ood saeIy (lSO 22000:2005), would make
the company more competitive in Europe, a
LUP!0 billion markeI (roughly 20x larger Ihan
Ihe NorIh Arican markeI), and more aIIracIive
to multinational clients and strategic buyers.
CogiIel invesIed roughly USS40,000 Io obIain
inIernaIionally recognized cerIicaIions
for quality and safety, and to enhance its
health and safety performance. Cogitel now
leverages its superior environmental and
social performance to differentiate itself
from its competitors and build trust with its
mulIinaIional clienIs, which include Danone
and Coca-Cola. !
Enhancing
Cogitels
Sustainability
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investment, TunInvest worked with
Cogitels management to create a
culture of sustainability throughout
the company. TunInvest raised the
awareness of Cogitels management
to environmental and social issues
and explained their links to the com-
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These eorIs included explaining:
The risks o nancial penalIies should liquid
waste spill over into the natural water
environment
The reducIion o producIion o cosIs
Ihrough more ecienI energy use
The relaIion beIween absenIeeism,
working conditions and productivity
AI Ihe same Iime, TunlnvesI provided CogiIel
wiIh Ihe Iechnical and nancial supporI
necessary to implement corrective actions, to
mitigate potential environmental and social
risks and to capture savings opportunities.
As an LP, llC requesIs iIs PL clienIs Io evalu-
aIe and improve Iheir LSG managemenI
as part of the condition for doing business
wiIh llC. Over Ihe lie o Ihe invesImenI, llC
also periodically reviews the PE fund client's
LSG eorIs and provides supporI and rec-
ommendations as needed, to help improve
LSG pracIices. ln Ihe case o TunlnvesI, Ihis
included L&S Iraining or sIa and evalua-
Iions o CogiIel's L&S perormance.Whereas
prior to TunInvests investment most
employees viewed environmental issues as
a secondary concern, now employees at
all levels view themselves as environmental
stakeholders. This outcome would not have
been possible without the deep commitment
and ownership of sustainability issues on the
part of the company itself. While TunInvest
has undoubtedly played an advocacy role,
Cogitel has been strongly committed to the
improvement of its social and environmental
performance and thus helped turn the
sustainability plans into a success.
Moreover, TunInvest shares Cogitels envi-
ronmental successes with its other portfolio
companies. We use Cogitel in conversations
with other investee companies, relays
Fathallah, and we say, look at this Tunisian
company making environmental enhance-
menIs in diculI operaIing condiIions like
yours: i Ihey can do iI, you can do iI.'
! Moreover, Cogitel began to recycle the
solvents emitted during the accessories cleaning
process. Today, Cogitel recycles all of its solvents
for use as cleaning agents for their machines,
corresponding to a reduction in solvent usage
o abouI J0 Ions per year, or roughly 75% o
Cogitels total cleaning agent needs.
CogiIel made signicanI reducIions in iIs
waste output, reducing the companys waste
raIe dened as Ihe amounI o wasIe as a
percentage of production capacity from
!J.8% Io 9.8%. These eorIs Io reduce Ihe
quantity of input materials improved Cogitels
margins by an esIimaIed S290,000 (roughly
!% o revenues) in 20!0.
Once you have a good environmental
and safety record, you leverage it all
over the place.
Anis Fathallah, Partner at TunInvest
Cost Reductions and Revenues
Generated Through Sustainability
Activity
Annual Savings/
Revenues
Energy savings US$335,000
Decline in waste rate US$290,000
Recovery and sale of
recyclable waste
US$52,000
30 ton per year reduction
in solvent usage
75% reduction
in total cleaning
agent needs
CogiIel also idenIied a number o wasIe producIs,
including plastics, paper and wood products,
which could be collected, recovered, and then
sold for recycling. The estimated gains from
Ihese acIiviIies or 20!! amounI Io S52,000.
Decline in Waste Rate
16%
14%
12%
10%
8%
6%
4%
2%
0%
Prior to TunInvest
(1996)
After TunInvest
(2007)
10.9%
13.8%
$13,803
$2,983
$13,002
$4,638
$14,509
$8,041
$15,701
$1,436
$16,393
$11,109
$16,151
$17,181
The Emerging Markets Private Equity Association (EMPEA) is an independent, global membership
association whose mission is to catalyze private equity and venture capital investment in
emerging markets. EMPEAs 250+ members include leading institutional investors and private
equity and venture capital fund managers across developing and developed markets.
Contact us at www.empea.net Email: empea@empea.net Phone: +1 202 333 8171
Results of the Partnership
Since TunInvests second round of
investment in Cogitel as anchor for the
Altea conglomerate, the group has grown
$,%/+:,-+%$>+%8+)*0.(%D+E0/8+%'):F)(0.(%
manufacturer in the Middle East and
North Africa (MENA). With TunInvests
help, the Zeghal family business has
obtained a 35% market share and annual
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the second largest provider in the market.
! Building Human Capital
Cogitel has undertaken a number of activities
to enhance its social and governance
practices. With TunInvests encouragement,
Cogitel conducted a risk assessment study
and initiated a number of safety best practices
to accelerate the process of establishing an
employee health and safety management
system in line with international standards
(OHSAS !800!, planned or 20!!/20!2). Over
the last three years, Cogitels efforts have
reduced iIs requency index o onIhejob
accidenIs rom !5.9% Io 9.6%.
Cogitel has also
invested heavily in
human resources
and professional
development.
Beginning with
the recruitment of
university students,
Cogitel provides
new employees
training in an array
of topics not only
in adhesives, inks,
and manufacturing,
but also in English
and managemenI:
Moreover, the company is a reliable partner
for most multinationals in the region. To wit,
AlIea is now among Ihe Iop !0 global suppliers
o exible packaging Io Ihe Danone Group.
Having implemenIed Iheir sIraIegic objecIives,
the Cogitel and TunInvest teams are integrating
their acquisitions and capitalizing upon synergies
to ensure the companys growth continues.
Breakdown of Local vs. Foreign Sales (US$, 000)
2005
$16,786
$17,640
2006
$22,550
2007
$17,137
2008
$27,502
2009
$33,332
2010
! Sales (local) ! Sales (exports) " Total Sales
96% o new employees compleIe CogiIel's
training programs successfully. These training
programs have helped Cogitel boost worker
producIiviIy: sales per employee grew rom
TND!!0,000 in !996 Io TND2J7,500 in 2007.
Cogitels commitment to being a responsible
corporate citizen extends to the communities
in which it operates. The company donates
roughly USS20,000 Io local social and rural
development funds every year.
Sales per Employee
(thousands of Tunisian Dinars)
250
200
150
100
50
0
+114%
After TunInvest
(2007)
237.5
Prior to TunInvest
(1996)
111
From the
beginning of
the relationship,
TunInvest has
pushed the
company to grow
its exports and
to target the top
customers in the
region such as
Danone, Henkel
and Coca-Cola;
the introduction
of higher
environmental and
social standards
has been a key
differentiating factor
to attract and retain
these customers.
Nadia Zeghal
Marrakchi,
CEO of Cogitel