An activist shareholder that forced change at Berry Global Group Inc. sees plenty of continued upside from Amcor plc's announced purchase of the packaging giant.
Ancora Alternatives LLC, a Cleveland-based investment firm, was a key driver in forcing Berry to reexamine its business after putting more than $100 million into the publicly traded company. Ancora started to show its displeasure publicly as early as 2021. Fellow activist investor Eminence Capital joined it in seeking change.
Ancora and Eminence, after publicly sparring with Berry leadership, eventually were able to see that three new people were appointed to Berry's board in 2022. What followed was a significant change at the Evansville, Ind.-based company, ultimately leading to its proposed sale to Amcor, announced in November.
Along the way, Tom Salmon retired as CEO in 2023, replaced by Kevin Kwilinski. Then Berry cleaved off the firm's Health, Hygiene and Specialties business that merged with Glatfelter Corp. to create a new company called Magnera Corp.
James Chadwick, president of Ancora, laid out his view of Amcor's $8.4 billion all-stock purchase of Berry during the Bloomberg Activism Forum Dec. 10 in New York.
Ancora believes "the combined entity stands to be a premium packaging company with a durable free cash flow profile and a conservatively estimated $650 million in synergies, at what we believe is a significantly discounted valuation," the company said in releasing presentation slides from the forum.
"The combination creates a compelling investment opportunity with 50 percent to 70 percent upside, underpinned by Ancora's strong conviction that the announced synergies are conservative," the investor said. "On a proforma basis, Ancora estimates the combined entity's EBITDA (earnings before interest, taxes, depreciation and amortization) could be $4.5 billion and its shares could rise from [about] $10 today to [about] $16 in the coming years."
Ancora claims a total return of 56.4 percent from Berry since the company's 2022 cooperation agreement.
Ancora also believes $650 million of so-called synergies will take place after Amcor's takeover of Berry, including savings of $325 million in procurement costs, $160 million in general and administrative costs, $45 million in operational costs, and $60 million each for categories described as growth and financial.
Amcor revealed its plans Nov. 19 to buy Berry in a deal that combines two of the world's largest plastic processors. Combining Berry with Zurich-based Amcor creates a $24 billion company. Just a week later, Berry reached an agreement to sell the company's specialty tapes business to private equity firm Nautic Partners LLC for $540 million.
The Franklin, Ky.-based tapes business also has locations in Riverhead, N.Y., and Bristol, R.I., making pressure-sensitive tapes and adhesives.
Ancora, meanwhile, also predicts that Amcor's earnings per share ultimately will increase by an estimated 40 percent as a result of the merger, according to Chadwick's presentation.
That leaves room for new investors to benefit from the deal, he said.
"Amcor has traded at a premium multiple for a long time. With this deal, investors can purchase a premium packaging company at a Berry-like valuation," Chadwick's presentation stated.