Packaging group Ardagh seals landmark $3.4bn acquisition
Irish packaging giant Ardagh has agreed to pay $3.4bn (€3bn) for assets being sold by rivals Rexam and Ball in what will be its biggest acquisition ever and arguably its most transformative.
It's also likely the biggest acquisition ever by a private Irish business, and will make Ardagh the third-largest beverage can maker in the world.
It comes just months after Ardagh pulled a planned €2bn stockmarket flotation of its own metal containers division, which would have been spun off into a company called Oressa.
Ardagh had planned a flotation of the entire group back in 2013, but that too was postponed due to market volatility.
Ardagh, headed by executive chairman Paul Coulson, inset, will add $3bn in annual sales to the group's balance sheet through the acquisition confirmed yesterday, increasing the €5.2bn ($5.8bn) of turnover it generated in 2015 by 60pc.
It will also catapult annual earnings before interest, tax, depreciation and amortisation (EBITDA) by about $400m (€355m). That compares to the €934m in EBITDA that Ardagh generated last year. Ball said the assets being acquired by Ardagh generated $375m of EBITDA last year.
Ardagh also confirmed that its chief executive, Niall Wall, will step down in September. Mr Wall is Mr Coulson's brother-in-law, and will be succeeded by former Smurfit Kappa chief financial officer Ian Curley.
The acquisition of the assets - which includes assumed liabilities of $210m - gives Ardagh its first foothold in the beverage can sector. It already makes glass bottles for wine and beer, as well as metal products such as kegs, anti-perspirant containers, and seafood containers, for a range of beverages and products such as Carlsberg, John West, Nescafe Gold Blend, Nivea and Heineken.
"Whilst we do not currently operate in the beverage can market, the business we are acquiring is highly complementary to our existing metal and glass businesses," said Mr Coulson, who along with his family owns a 36pc stake in Ardagh.
Ardagh Packaging is based in Ireland, but its parent company, Ardagh Group, is registered in Luxembourg.
In January, the European Commission approved the £4.4bn (€5.6bn) acquisition by US-based Ball Corporation of UK rival Rexam subject to the disposal of a number of assets. Ardagh was competing against private equity groups Apollo, Blackstone and Madison Dearborn for the assets.
The purchase by Ardagh will transform its already huge business. It's buying 10 beverage can manufacturing plants, and two can-body plants in Europe; seven beverage can manufacturing plants and one end plant in the United States; two beverage can manufacturing plants in Brazil; and some innovation and support functions in Germany, the UK, Switzerland and the US.
The business to be acquired by Ardagh will make it the number three beverage can manufacturer globally, number two in Europe and number three in the US and Brazil.
"You feel it ticks everybody's box," said Sandy Morris, a London-based analyst at Jefferies International. "Until we know which plants precisely have been divested - whether they're standard cans or speciality cans - it will be difficult for us to judge who's come out of it with the best deal."
Completion of the sale is subject to a number of conditions, and is expected to close at the end of June, coinciding with the completion of Ball's acquisition of Rexam.
Ardagh is funding the acquisition through a combination of cash, secured and unsecured debt. It said that it has launched a bond offering for a total of $2.85bn. Mr Coulson indicated that Ardagh may also raise equity.
Ardagh already has €4.7bn in net debt. The yield on its existing bond due in 2022 rose to 4.42pc yesterday, the highest level since early March, when it stood at 4.1pc.
The company also reported first-quarter results yesterday. Revenue was flat at €1.2bn, while EBITDA was rose just over 6pc to €217m in the first three months of 2016. Revenue at its glass packaging unit dipped 1pc on actual exchange rates to €743m. Revenue at the metal packaging unit was €475m, which was 1pc lower.