Is Berry Global Set To Knock-Down Apollo’s GBP3.3 Billion Buy-Out Offer For Rival RPC?

RPC group

The RPC Group, based in the UK and Europe’s largest plastic packaging business giant, is expected to receive yet another acquisition offer. Berry Global Group, a United States-based fortune 500 manufacturer and marketer of plastic packaging products worldwide with over 131 facilities across the globe, has announced plans to extend a cash proposal to RPC and requested due diligence information from the company.

The announcement came in when RPC closed the discussion one week ago with Apollo Global Management, the American private equity firm, following which the RPC group declared that it was planning to accept the GBp 3.3-billion acquisition offer from Apollo after prolonged negotiation.

Apollo’s bid remains resolute with no scope of competitive adjustment in face of Berry Global’s offer. The company terminated the deal, not yet locked, under which all the shareholders of RPC would receive 782 pence cash for every share they own, an increase of about 15.6% relative to the packaging Group’s closing price of 683.6 pence as at September 7, 2018, the last day before they confirmed the terms of the acquisition.

The recommendation had sparked a lot of commotion and counter arguments from the investors who perceived the deal as unfair and undervalued.

With confidence in RPC’s past record of delivering attractive dividends, major investors like Royal London Asset Management, the UK-based investment management company voiced against the share price offer from Apollo, recommended to all the shareholders. Royal London holds over 1% stake in the company, and is amongst RPC’s top 20 investors and quite in favour of the potential rival offer.  Adding to the stance, Aviva Investors, another asset management company and shareholder in RPC, also expressed its disapproval towards the former offer and calls it an unfair value to the investors in the business. All the investors have been anticipating the takeover to be undertaken at a premium of at least 30% to the company’s undisturbed share price.

As of now, Evansville, Indiana-based Berry Group has not yet confirmed the offer and is amidst consultations from its advisors. On the other side, RPC has announced that it will take up Berry’s request for information in line with its “takeover code” which emphasises on delivering best value to the shareholders.

Berry Global, with a market cap of USD6.3 billion, is in fact a competitor to RPC and thus a future acquisition would increase the scope of its market synergies to explore. According to its quarterly report for 1Q 19, the company posted a 9% increase in its net sales at USD2.1 billion compared to the prior corresponding quarter in 2017.

On February 01, 2019, Berry Global Group Inc (BERY) shares last traded at USD48.26, down by 1.94% on the New York Stock Exchange. Meanwhile, RPC Group’s (RPC) FTSE 250 London Stock Exchange-listed shares were trading at GBp 793.02, down by 0.25% indicating an intra-day fall of GBp P1.98.

With the RPC’s current stock performance, it was only unlikely that RPC’s management would have agreed to Apollo’s proposition. Thus, Berry Global can take advantage of the opportunity.