Did Orora have ‘something’ up its sleeve when it sent Lone Star packing last month after ignoring the American investor's non-binding, airy A$2.55 per share first offer?
Yesterday’s sale of its US business for around A$1.7 billion suggests that it was confident it had ‘something’ to justify the rejection, even though the share price was around A$1.90 at the time and not looking healthy as investors soured on the big purchase of the French group, Saverglass, nearly a year earlier.
The A$3.42 billion suggested price floated by private equity firm Lone Star Fund was rejected, with Orora management stating it materially undervalued the packaging products maker. Under the offer, Orora shareholders would have received A$2.55 per share from Lone Star, a 33.9% premium to the stock's last close.
News of the US sale saw Orora shares rise more than 6% on Wednesday to around A$2.66. The shares leapt 13% on the news of the rejection on August 13, and from August 8 to August 16, they surged 33%.
Orora didn’t even leave itself an out by continuing to talk to Lone Star to see if a more attractive price could be conjured up—just a firm ‘no, go away.’ Orora described the offer as opportunistic, non-binding, and conditional, which it certainly was. But perhaps it could also be seen as a godsend, as it probably got the company and its US buyer more interested in completing a deal ASAP.
Up to the news of Lone Star's interest, Orora shares had slumped about 42% since the company agreed to buy French high-end glass manufacturer Saverglass for A$1.4 billion last September. Now, Saverglass is part of the new, sleek Orora, post-US sale.
In Wednesday’s announcement, Orora said the sale would transform it into "a focused beverage packaging business, with market-leading positions and a defensive growth profile across beverage substrates and end-markets." It will leave Orora with "a strong balance sheet, providing flexibility to pursue value-accretive organic growth opportunities," the company added.
(A lean, mean bottling machine, perhaps?)
The sale will leave around A$1.68 billion in net cash, which will be used to expand the Brisbane can-making factory with a A$130 million investment, reduce debt (and probably restructure its loans), and no doubt give some money back to shareholders, who must feel they are going to get an early Christmas treat.
