Odds favour RPC takeover by Apollo despite interest by Berry Group

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Photo by RPC Group Selection of packaging solutions produced by RPC Group

The case of a buyout offer for UK packaging firm RPC Group took a new turn with an expression of interest from Berry Global on 31 Jan.

RPC confirmed on 31 Jan that it had received a due diligence information request from Berry Global.

The move by the Indiana, US-based packaging giant followed a confirmed €3.8bn offer by private equity firm Apollo Global Management to buy RPC on 23 Jan.

But the Apollo acquisition received a new boost, as a big shareholder in RPC, Eminence Capital announced that it had sold 726,169 of its controlled shares in RPC on the London Stock Exchange 1 Feb.

The New York-based hedge fund sponsor, which holds more than 7% of RPC shares, also confirmed that its letter of intent was valid in respect of its remaining 2,270,666 RPC shares.

Prior to the publication of its offer on 23 Jan, Apollo had received a letter of intent from Eminence Capital, which said it would vote in favour of the acquisition.

“There is generally a sense of silent approval among the shareholders for the Apollo takeover,” a source close to the deal told Plastics News Europe.

However, smaller stakeholders in RPC are reportedly not happy with the offer.

“The current offer from Apollo… probably disappointed many investors. A lowball offer certainly leaves the door open to a rival bidder,” Nicholas Hyett, an analyst with Hargreaves Lansdown, told Reuters.

An industry buyer like Berry, he went on to say, would be best placed to make a higher number stack up.

"A listed player could pay in a mixture of equity and cash – meaning a higher offer may not require substantially more debt than the Apollo deal,” Hyett added.

Craig Yeaman, fund manager at Royal London Asset Management, which owns 1.33% of RPC, also expressed his disagreement to Reuters, saying "Apollo was always going to run this risk having pitched the bid at this level, which has clearly given others encouragement.”

“Berry Global, being a competitor to RPC, would have plenty of synergies to go after and the first casualties could include senior management who were so willing to accept Apollo’s offer,” Yeaman said.

Apollo has offered to pay RPC shareholders £7.82 (€8.93) per share in cash, a premium of 25% from RPC’s closing price on 22 Jan.

Apollo's "final offer" came after months of negotiations between the two companies, beginning in September last year.

UK-based Investors Chronicle has reported that another RPC major shareholder Canyon is backing the Apollo offer too.

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