Berry buying RPC Group for $4.37B to create 'global' platform

Berry Global Group Inc. is acquiring RPC Group plc in a blockbuster $4.37 billion, all-cash deal that trumps an earlier purchase attempt by a private equity firm.

RPC, with 153 manufacturing sites in 33 countries, brings about 25,000 employees to Berry's existing workforce of about 23,000.

The move combines Berry's concentration of business in North America with RPC's concentration in Europe and provides a global plastic packaging platform for even more expansion in the future, CEO Tom Salmon said.

"We believe this highly strategic move puts us in a better long-term position from an industry and competitive perspective. RPC helps us achieve balance across geographies, markets and substrates," Salmon said on a March 8 conference call to discuss the deal.

"The combination is truly a global M&A platform, allowing us to maximize the collective strength of both organizations, providing for additional growth opportunities that were previously less actionable for us," Salmon said.

While Evansville, Ind.-based Berry has taken some rather big swings in the mergers and acquisitions market in recent years, the move for RPC is the company's largest ever.

Berry has a decades-long history of growing through acquisitions and prides itself on its abilities to acquire and integrate new operations.

RPC's decision to accept Berry's offer trumps an earlier attempt by Apollo Management Group LLC, a private equity firm, ​ to acquire RPC, based in Rushden, England. Apollo previously had made what it termed a final offer for RPC that was accepted. But the use of the word "final" in Apollo's offer has specific meaning in United Kingdom regulatory language and precluded Apollo from upping its offer.

This gave Berry an opportunity to interject itself once RPC was in play and decide whether to make a run for the company. Berry was facing a March 13 deadline to make its intentions known when announcing the deal March 8.

Berry, thanks to dozens of acquisitions over time, has grown into a company with $8.1 billion in expected sales this year prior to the propose acquisition. RPC will add another $4.8 billion in annual sales to bring the combined total to about $13 billion. RPC posted earnings before interest, tax, depreciation and amortization of $768 million for the fiscal year ended Sept. 30.

RPC dates to 1991 when a manager purchased five locations in the United Kingdom from Svenska Cellulosa AB, or SCA, a Swedish company better known for its paper and forest products businesses. That firm has grown tremendously in size over the years, thanks in part to its own series of acquisitions.

That includes 2017's purchase of Letica Corp. of Rochester Hills, Mich., a deal that more than doubled its North American business by adding 13 plants at the time.

RPC makes plastic products in all five major conversion processes, the company says in its annual report: injection molding, blow molding, thermoforming, rotational molding and blown film extrusion.

"RPC's technologies align nicely with our existing technologies, including injection molding, blown film extrusion, blow molding and thermoforming," Salmon said.

Berry is a powerhouse in plastics processing in North America, ranked at No. 1 for film and sheet in Plastics News' latest ranking for the region. It is in the top 10 for both injection molding and thermoforming, according to PN's rankings, and it lands at No. 11 for blow molding.

Uncertainty has surrounded RPC for months as two private equity funds initially showed interest in the firm after RPC Chairman Jamie Pike said the company was under pressure by investors to make changes. Bain Capital eventually dropped out of consideration, clearing the way for the Apollo bid that's now been bested by Berry.

Berry said debt financing for the deal already is in place. The company, in a statement, said it "intends to utilize the enhanced free cash flow of the combined business to reduce leverage quickly."

Berry also expects to create $150 million in annual cost savings by combining with RPC.

Absorbing RPC will put Berry just behind Amcor Ltd. and its pending acquisition of Bemis Co. Inc. as the world's largest plastics packaging operations.

"This positions Berry with significant size and scale advantage to many of our peers and offers compelling advantages, including industry scale, enhanced supply chain positioning, market depth and breadth, and increased ability to provide full service to customers," Salmon said. "All of these factors combined create defensible, competitive advantages that we believe put our company in a stronger position moving forward."

The deal, expected to close during the third quarter, is valued at 793 pence or share, or 11 pence higher than Apollo's 782 pence offer. There are 100 pence in a British pound, just like there are 100 pennies in a U.S. dollar. The total value of the deal in British pounds is 3.34 billion.

Including assumption of RPC debt, the transaction is valued at $6.5 billion. The acquisition will push Berry's debt higher than typical for the firm, but Salmon said a priority will be returning debt to more typical levels.

"The board of RPC is pleased to recommend Berry's cash offer for the group, which is at an 11 pence per share premium to the Apollo proposal and provides shareholders with significant value in cash for their shares," Pike said in a statement.

"The combination of RPC and Berry would create a leading global plastics products design and engineering company and represents a strong strategic fit. Both companies are highly complementary in terms of product portfolio, customer base, polymer conversion technologies and geographic footprint," Pike said in the statement.