9th Jun 2016 15:16
LONDON (Alliance News) - Plastic products maker RPC Group PLC on Thursday struck a deal to beef up operations with the acquisition of fellow London-listed firm British Polythene Industries PLC, the latest in a slew of deals made by RPC.
FTSE 250-constituent RPC will pay 470.00 pence per share in cash and 0.60141 of new RPC shares for British Polythene, a polythene films producer, valuing the group at a total of GBP261.0 million.
The total per share value of the deal will be around 940.00p per British Polythene share, a 30% premium to the stock's closing price of 725.00p per share on Wednesday, which had given the company a market capitalisation of GBP198.9 million.
To part-fund the deal, RPC announced a share placing to raise about GBP90 million. The accelerated bookbuild was handled by Deutsche Bank AG and Panmure Gordon (UK) Ltd. Later, RPC said 11.0 million shares were placed by the bookrunners at 815p per share each, a discount of 0.1% to the closing price on Wednesday. RPC shares were up 3.7% at 846.00p Thursday.
Unsurprisingly given the premium being paid, British Polythene shares were trading sharply higher on Thursday, up 35% at 978.50p and very comfortably the best performer in the FTSE All-Share.
British Polythene produces polythene films for the European market and is among the largest recyclers of waste polythene films in the region.
RPC said the deal will provide it with exposure to an adjacent polymer market and increase the range of polymer conversion technologies in its portfolio. The move is in line with its Vision 2020 strategic plan, which includes a push to drive strategic consolidation in RPC's European markets.
British Polythene is the latest in a series of acquisitions made by RPC as it looks to expand. In late 2014, it spent EUR386.0 million on Icelandic rigid plastic packaging and components company Promens. In December last year, it followed that with a EUR650.0 million agreement to acquire Global Closure Systems, a French plastic closures and dispensing systems specialist.
The welcome given to the British Polythene deal by shareholders may well have been driven by its track record from those two recent acquisitions. In its annual results, published last week, RPC upgraded the cost synergies it will make on the Promens and GCS deals. RPC said it anticipates the annual cost synergies from the two integrations will total EUR80.0 million, EUR15.0 million more than its previous estimate.
Further acquisitions, particularly ones within the price bracket of Promens, GCS and now British Polythene, were likely to get a positive reaction given the success RPC reported on the previous deals.
Numis analyst Kevin Fogarty on Thursday said the British Polythene acquisition provides RPC with a platform in the polythene films market, enhances its polymer purchasing power, and is in line with the company's Vision 2020 growth strategy.
"Strategically, the acquisition represents an entry point into an adjacent market for RPC Group and the valuation appears reasonable on a pre-synergy basis," Fogarty said, adding the price paid looks "reasonable".
"The proposed offer for BPI represents a compelling strategic opportunity for RPC to enter the European polythene films market through an established platform. BPI has a strong product portfolio with attractive market positions in its core markets in Europe," said Pim Vervaat, RPC's chief executive.
"The combination will further broaden RPC's range of polymer conversion technologies in line with global peers, establish a new growth platform with a strong cost synergy potential whilst enhancing the group's overall polymer buying capability," he added.
"The last five years have seen consistent improvements in BPI's performance and prospects, but not all of this progress has been reflected in the price or rating of BPI's shares. RPC has recognised the value inherent in our business and prospects by making an offer at an attractive premium to the share price," said Cameron McLatchie, chairman of British Polythene.
By Sam Unsted; [email protected]; @SamUAtAlliance
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