RPC rules out Bain Capital as potential buyer, talks continue with Apollo

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UK-based plastic packaging company RPC Group Plc has terminated talks with US private equity firm Bain Capital about a buyout offer but is still in negotiation with other interested party Apollo Global Management, based in New York.

The Rushden, Northamptonshire-headquartered packaging specialist announced 3 Dec that it had mutually agreed with Bain Capital to terminate discussions but extended the deadline for the buyout offer by Apollo for a third time from 3 Dec to 21 Dec.

RPC announced in September that it was in preliminary discussions with two US-based private equity firms over the offers which could value the firm at £2.8bn (€3.1bn).

The move has been in response to what RPC chairman Jamie Pike has described as pressure by investors.

"Pressure on the company’s market valuation and differing investor views on the appropriate level of leverage is constraining the group’s ability to pursue some attractive opportunities for growth and your board is working to resolve this," Pike said in an 18-July AGM trading statement.

"In the short-term, the group will prioritise cash generation and the announced disposal of our non-core businesses, with a view to generating increased capital for deployment in the business or further returns to shareholders,” Pike added.

PNE has learnt that following the July announcement by Pike, RPC was approached by the two private equity firms with the buyout offer.

RPC, which has been on an acquisition trail in the past few years, saw its shares dropping last March following a report by Northern Trust, which accused the company of disguising structural problems with many of the acquisitions it had made.

An FT article on 22 March 2017, quoted Northern Trust analyst Paul Moran as saying that RPC management had been encouraged to pursue value-destructive acquisitions by “innovative” bonus schemes and “some of the most aggressive accounting we have seen”.

"He argued that RPC’s definitions of adjusted profit and free cash flow had been inconsistent over the past five years, and had flattered the figures in ways that sometimes 'defy accounting logic'," the FT report added.

RPC reported a 36.4% year-on-year increase in sales at £3.74bn for the full year 2017, with adjusted profit before tax up 36.1% at £389m.

The proposed takeover follows another major consolidation deal in the market, Amcor Ltd’s $6.8bn (€5.88bn) takeover of US flexible packaging giant Bemis Co Inc.

Melbourne, Australia-based Amcor announced 7 Aug that it was acquiring Neenah, Wisconsin-based Bemis in a bid to expand its global flexible packaging presence.

This latter transaction is subject to approval by regulators and shareholders of both firms and is expected to complete in the first quarter of 2019.

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