1st May 2014 09:52
LONDON (Alliance News) - Rigid plastic packaging supplier RPC Group PLC Thursday said it will buy Hong Kong-based injection moulded components and tools maker ACE Corporation Holdings Ltd for up to USD430 million, an acquisition it has been working on for three years.
In a statement, RPC said it thinks the deal will add a high-growth niche to its portfolio, give the British company a platform for growth in the Far East, and boost its earnings. ACE's operating profit rose to HKD245 million in 2013, from HKD94 million in 2011, and it has a better return on capital employed than the British company. RPC also expects to generate annual pretax cost savings of at least GBP1 million from the first full financial year after the acquisition.
"RPC identified ACE as a compelling acquisition target some time ago and has spent the past three years working with the management team and shareholders of ACE to fully understand the business, assess the combined fit with RPC and, latterly, negotiate the terms of the acquisition," it said in a statement.
The maker of plastic packaging used for everything from food storage to paint pots to garden pesticides and engine oils, said it will pay an initial USD301 million for ACE, and then up to USD129 million more as long as the acquisition achieves a earnings before interest, tax, depreciation and amortisation compound annual growth rate of at least 15.6% over the four years to the end of 2017.
It said it will fund the initial payment, which is 7.4 times ACE's 2013 Ebitda of HKD314 million, by issuing ACE's shareholders with about 8.5 million new RPC shares, raising about GBP75 million in a share placing, with the rest coming from a new revolving credit facility.
RPC said it will issue about 13 million new shares in the placing, which will be done through an accelerated bookbuilding run by Deutsche Bank AG and Panmure Gordon Ltd. An accelerated book building involves little or no marketing.
It has also entered into a GBP350 million multi-currency revolving credit facility maturing in 2019 with seven UK and European banks. Commerzbank AG is the agent. The facility will refinance RPC's existing GBP200 million credit facility maturing in 2015, as well ashelping to finance the acquisition and for general corporate purposes. If the acquisition does not complete, the facility will be scaled down to GBP294 million.
"The acquisition represents a strategic move for RPC, establishing a strong and well-invested manufacturing footprint in the Far East where we believe there is an opportunity for continued high growth," RPC Chairman Jamie Pike said in a statement.
"RPC and ACE have worked together for several years and it is clear that the combination represents a compelling fit. ACE's focus on high growth niche segments and its expertise and market position in mould making further enhance RPC's business model," added Chief Executive Pim Vervaat.
In a trading update, RPC said the company expects its overall trading performance for the financial year that ended March 31 to be in line with management expectations, after revenue in the fourth quarter rose compared with the previous year thanks to acquisitions it made in December and better activity levels.
"The board of RPC remains confident that further progress will be made going forward against the backdrop of more encouraging macro-economic conditions," it said.
RPC Group shares were up 4.3% at 625.70 pence Thursday morning, one of the biggest gains on the FTSE 250.
By Steve McGrath; [email protected]; @stevemcgrath1
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