The private equity firm Apollo Capital has today been ‘trumped’ in its bid to take control of UK plastics packing business RPC (RPC), and it’s got nothing to do with US President Donald.
Swooping in from left-field is Berry Global, the $6.7bn NYSE-listed US packaging peer to RPC, which has today tabled an improvement on Apollo’s £3.3bn, 782p per share offer.
DETAILS OF THE NEW DEAL
Berry’s deal would see RPC shareholders get 793p per share of cash, which works out at an extra 11p per share, or an extra £45m overall, hardly cream on top to move the RPC share price needle. And it hasn’t, RPC’s share price declining 1.3% on Friday to 785.6p.
READ MORE ABOUT RPC HERE
‘The [Berry] offer represents a premium of 16% to the closing price on the last business day prior to the start of the Offer Period,’ analysts at Numis Securities have number crunched, but this is hardly generous.
RPC’s share price has traded above the 800p mark several times during the past, albeit volatile, year.
What is perhaps surprising is that Berry has found the cash at all.
‘With year-end net debt of circa $5.5bn, period end net debt/EBITDA was 3.9-times,’ calculate Numis, or roughly 3.8-times if you factor in implied synergies from previous acquisitions.
STRETCHING THE BALANCE SHEET
EBITDA stands for earnings before interest, tax, depreciation and amortisation, a well-used metric for profitability by City analysts. Banks typically start getting pretty nervous when debt/EBITDA tops three-times, so presumably Berry has lots of property and fixed assets bolstering its balance sheet.
Not that RPC shareholders will give a jot about that given that this is a straight cash offer and one that will allow a reasonable exit from a business straining under its own debt burden.
RPC management are showing the capricious nature that shareholders would no doubt want, ditching their recommendation for Apollo’s offer and throwing their support behind Berry.
Is this the end of it? Not necessarily, but probably. One of the advantages that trade buyers typically have over private equity is the ability to combine businesses and extract cost savings and operating efficiencies.
