Amcor Ltd., Australia“s largest packaging company, announced on 6 April that it has agreed to merge its European flexible packaging business with the European flexible packaging operations of Danisco…
Amcor Ltd., Australia“s largest packaging company, announced on 6 April that it has agreed to merge its European flexible packaging business with the European flexible packaging operations of Danisco Flexible and the majority of the operations of Akerlund & Rausing.The merger is expected to be completed by June, subject to regulatory approvals, with Graham James, Amcor“s head of European operations, to manage the new company. The merged company, to be called Amcor Flexibles Europe A/S, will be the market leader in Europe with annual sales of more than A$ 2 billion, and 40 plants spread across 14 countries. Amcor said it will contribute A$ 712 million for a 67% stake in the merged company, comprising A$ 342 million for its existing business and cash of A$ 370 million. It also announced plans to raise A$ 300 million through an offering of perpetual convertible reset securities. The offer allows Amcor to accept oversubscriptions of up to A$100 million. Amcor said it expects a return of 15% profit before interest, tax and amortization to average funds employed by the third year of operation, reflecting expanded business operations and synergy benefits. “The transaction will be earnings-per-share positive from year one for Amcor,” the company said. “These benefits are expected to come from a range of initiatives including greater plant focus, restructured corporate and sales organizations, product mix optimization, and increased leverage from research and development spending and improved raw material purchasing.” The merged entity, which will be 25% owned by Danisco and 8% owned by Akerlund & Rausing“s parent Ahlstrom OYJ, will focus on products targeting the higher technology end of the market such as the coffee, confectionery and fresh food segments. Put and call options give Amcor the ability to move to 100% over a two-to-four year period. Currently, Amcor“s European flexible packaging operations generate around A$ 550 million in annual sales. The company also said the transaction will have benefits for the Amcor packaging operations in Australia, as they will be able to leverage off product innovation, plant benchmarking, purchasing and research and development of the new company. The planned merger of its European flexible packaging business should bring cost savings of A$ 70 million in three years.