The company attempting to take over one of Australia's largest plastic packaging companies is gradually edging closer to full ownership, but the journey has been arduous.
Publicly listed, Melbourne-based Pact Group Ltd. Chairman Raphael Geminder's family-owned company, Kin Group Pty. Ltd., lodged a takeover bid in the name of a wholly owned subsidiary, Bennamon Industries Pty. Ltd., last September, valuing Pact at A$234 million (US$152.9 million).
Geminder's private family companies already owned 50 percent of Pact before the bid was made, but in December Bennamon was forced to increase its offer price from A68 cents (US44 cents) a share to A84 cents (US54 cents) a share, taking Pact's revised value to A$289 million (US$188.9 million).
Bennamon also had to extend the deadline for shareholders to accept its offer three times, because acceptances were low.
It also implemented more generous payment terms. On Jan. 3, when Bennamon reached 85 percent ownership, it told recalcitrant shareholders it would pay them within five days of their acceptance as a sweetener to help it to the 90 percent ownership level. The shareholders that are holding out still have until Feb. 12 to decide whether to accept.
Australian Stock Exchange (ASX) rules allow a takeover bidder to automatically acquire remaining shares once it crosses the 90 percent ownership threshold. If Bennamon doesn't reach that level it must apply to the ASX under complex rules to seek approval to buy the remaining shares.
Bennamon told shareholders in its seventh updated bidder's statement that payments will likely be slower if it is forced into a compulsory acquisition of the final shares. It plans to delist and privatize the company as soon as possible.
Pact's independent directors had urged shareholders to reject the initial offer after an independent expert's report by Sydney-based financial adviser Kroll Australia Pty. Ltd. found the offer was "neither fair nor reasonable."
Kroll's report said the estimated value of a Pact share was between A$1.06 (US69 cents) to A$1.51 (US98 cents), which valued the company at between A$366 million (US$239 million) and A$520 million (US$339.9 million).
But once Bennamon increased its offer, the independent directors advised shareholders to accept it. Pact's second largest and long-standing substantial shareholder, fund manager Investors Mutual Ltd., which owned about 6 percent of Pact, accepted the higher offer.
At Pact's annual general meeting in mid-November, before the higher offer was announced, Geminder chaired the meeting but refused to answer questions on the takeover bid. Newspaper reports said unhappy shareholders' attempted to draw information from him and an Investors Mutual representative asked why Pact had not brought more independent directors onto the board.
Geminder told shareholders no dividend would be paid because the company lost A$7 million (US$4.57 million) in the financial year to June 30, 2023.
Meanwhile, in mid-December, Pact and its partners started operations at a new A$50 million (US$32.7 million) facility in Melbourne, capable of recycling the equivalent of up to 1 billion 600-milliliter PET plastic beverage bottles a year.
The plant is owned by Circular Plastics Australia (PET), a joint venture among Pact Group, Cleanaway Waste Management Ltd., Asahi Beverages — a unit of Japan's Asahi Group Holdings — and Coca-Cola Europacific Partners plc (CCEP).
Pact managed the build and operates the facility, along with another one owned by the same joint venture, a similar-sized plant in Albury, New South Wales, that started operations in March 2022.
A Pact statement said the new Melbourne plant can produce 2.5 tons of recycled PET resin an hour. Infrared and optical sorters separate non-PET material, such as bottle lids, labels and metals. The PET bottles are then shredded, ground and washed, before the flaked material goes through a two-stage heating and drying process. The washed flake undergoes an extrusion and purification process to produce recycled PET resin certified to U.S. Food and Drug Administration standards.
The plant's opening coincides with Victoria launching a container deposit scheme (CDS). Pact's statement said the plant will play a key role in recycling PET bottles collected through the CDS and PET plastic packaging from household and office recycling bins.
Cleanaway provides used PET plastic to be recycled through its collection and sorting network. Asahi and CCEP use the recycled resin from the joint venture's facilities to make new 100 percent recycled PET beverage bottles while Pact manufactures recycled food and beverage packaging for its customers.
Pact Managing Director and CEO Sanjay Dayal said the two Circular Plastics Australia (PET) recycling facilities can process up to 2 billion plastic bottles a year, keeping thousands of tons of plastic waste out of landfill.
The Melbourne facility received A$6 million (US$3.92 million) in funding through the Australian Government's Recycling Modernisation Fund and the Victorian Government's Circular Economy — Recycling Modernisation Fund.
In early December 2023, Pact announced that it had finalized its sale of 50 percent of its crate pooling and manufacturing business to global infrastructure investment manager Morrison & Co. for A$160 million (US$104.5 million), with an earnout potential of up to A$20 million (US$13.07 million).
A Pact statement said the business has been rebranded Viscount Reuse and operates independently. It has contracts with major grocery chains, including Woolworths, Aldi Australia and Foodstuffs in New Zealand.
It just opened a new facility in Auckland, New Zealand, that washes and recycles crates, as a "sustainable alternative to single-use cardboard and polystyrene boxes." Crates can be reused about 140 times before they are recycled.