The world's biggest listed packaging company, Amcor Ltd, on Monday swooped on US rival Bemis Company Inc in a $5.25 billion all-stock deal that comes as packaging firms are jostling to buy growth with acquisitions.
The transaction gives Australia-listed Amcor some new products, particularly food-packing film for which Bemis is known, as well as deeper access to the Americas at a time when shifting customer preferences are shaking up the industry.
Bemis shareholders get a 25 percent premium on the company's closing stock price last Thursday, before details of the deal were reported. Amcor will now have a bigger foothold in the United States, which will help it manage shifting industry needs for packaging that addresses changing consumer preferences such as snacking and environmental concerns.
Amcor Chief Executive Officer Ron Delia said in an interview with Reuters on Monday that divestitures were unlikely to result from the merger. "We're very happy with our portfolio as it currently sits, and this Bemis transaction just bolters that portfolio," he said. "It's the perfect fit for our flexible packaging footprint."
Delia said the two companies first began talks in January this year. Under the deal, Amcor will issue 5.1 of its shares for each Bemis share, valuing the stock at $57.75 per share, and Bemis shareholders will end up with 29 percent of the combined company, which will be listed in both Sydney and New York.
The price is 12 percent higher than Bemis' share price on Friday after the deal became public. The price of Bemis stock was down 0.42 percent at $51.37 a share early Monday afternoon in trading on the New York Stock Exchange. "I think it is a reasonable 'out' for a company which has been struggling (Bemis). I think Amcor is getting great technical know-how," said Mark Wilde, analyst at investment bank BMO Capital Markets.
Bemis' CEO, William F. Austen, said shareholders would realize "a significant premium ... as well as the opportunity to continue to participate in the upside potential" of a bigger company.
The acquisition is the 12th-largest outbound M&A deal by an Australian listed company, according to Thomson Reuters data, and the largest acquisition by the 158-year-old firm that began as a paper miller. It is also its 12th deal the last two years as it buys growth around the world.
Bemis, which was founded as a burlap sack maker, has been facing hard times as changing consumer demands have upended a sector with modest but dependable growth rates. Just in the last few months, UK-based packaging group DS Smith Plc offered 1.9 billion euros ($2.2 billion) to buy Spanish rival Europac, while Ireland's Smurfit Kappa agreed to buy Dutch paper and recycling firm Reparenco.
"It's going to be a big challenge. There's so much competition," Chip Dillon, a packaging company analyst at Vertical Research Partners, said in an interview. He suggested Amcor might start by shedding some of Bemis' lower-margin manufacturing.
Amcor said it will maintain a "critical presence" in Wisconsin, where Bemis is headquartered. The transaction is subject to approval by regulators and shareholders of both firms and is expected to complete in the first quarter of 2019.
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