Apollo Global to buy packaging group RPC for 3.3 billion pounds

(Reuters) - Apollo Global Management is to buy packaging products maker RPC Group RPC.L for 3.3 billion pounds ($4.28 billion) in cash after months of negotiations, marking the latest M&A deal for an industry in the midst of a consolidation phase.

FILE PHOTO: Leon Black, Chairman, CEO and Director, Apollo Global Management, LLC, May 1, 2018. REUTERS/Lucy Nicholson/File Photo

The acquisition highlights how the sector’s reliable cashflow, driven by demand from online shopping, is proving attractive to private equity firms and bigger packaging players.

RPC, Europe’s biggest plastic packaging maker, makes a range of products including packaging for beverages, coffee capsules and healthcare products.

Apollo’s offer of 782 pence per share represents a premium of 15.6 percent to RPC’s closing price on Sept. 7, the last trading day before the offer period began.

Aviva Investors, which owns a 1.93 percent stake in RPC according to Refinitiv Eikon data, said separately that it did not agree with the terms of Apollo’s offer.

“In our view, this protracted bid process has not delivered fair value to RPC’s shareholders,” said David Cumming, Chief Investment Officer for Equities at Aviva Investors.

The final offer price was some way behind what analysts had suggested was possible, said Nicholas Hyett, an analyst at Hargreaves Lansdown.

Hyett said it was not impossible for a rival bidder to emerge but plastic packaging was far from popular at the moment and with the global economy looking rocky, it might be asking a bit much to expect a rival to pay around 4 billion pounds to keep RPC out of private equity hands.

He also said that with board backing and minimal regulatory concerns, he expected the deal to go through.

The RPC deal is not Apollo’s first foray into the plastics and packaging industry. The private equity firm previously owned U.S.-based Berry Plastics.

Other M&A deals in packaging last year included Australia's Amcor Ltd's AMC.AX agreement to buy U.S. firm Bemis Co BMS.N for $5.25 billion and DS Smith Plc's SMDS.L $2.2 billion deal to acquire Spanish rival Europac PYCE.MC.

The plastics industry is facing tighter regulation in Europe and elsewhere due to environmental concerns.

RPC, which operates in 33 countries and employs about 25,000 people, said in September it was in talks on a possible sale to Apollo and another private equity firm Bain Capital.

The deadlines on the deal for Apollo and Bain were repeatedly extended and Bain Capital ended talks in December.

RPC had said last July that shareholder pressure was preventing it from pursuing some growth opportunities. RPC had been investing heavily to take advantage of Chinese demand as well as produce more recyclable plastics, prompting fears that higher spending would hit cash flow.

Apollo’s affiliate will finance the deal through a combination of equity and debt provided by a number of banks.

RPC’s London-listed shares rose as much as 5.5 percent to 774 pence, while Apollo’s shares were down 0.4 percent at $27.04 on the New York Stock Exchange. RPC’s shares ended at 766.50 pence, well below Apollo’s offer price of 782 pence per share.

RPC was advised by Rothschild & Co, Credit Suisse CSGN.S and Evercore EVR.N. Barclays BARC.L and Citi C.N acted as lead financial advisers for Apollo.

($1 = 0.7717 pounds)

Reporting by Sangameswaran S and Arathy S Nair in Bengaluru and Simon Jessop in London; Editing by Anil D’Silva and Jane Merriman