The takeover bid for Australian plastics packaging manufacturer Pact Group Ltd. has fallen agonizingly short for the company's chairman, who launched the bid in September 2023.
When the bid finally closed on June 7, Chairman Raphael Geminder's family-owned company Kin Group Pty. Ltd., which he also chairs, had amassed an 87.86 percent stake in Pact, up from 50 percent that his family companies owned when the bid was launched.
However, under Australian law, unless a bidder reaches a 90 percent stake, it cannot compulsorily acquire the remaining shares. Instead, must go through a complex process that takes at least 12 months before they can delist the company from the Australian Securities Exchange (ASX).
Geminder also faces another battle. Australia's only ethylene manufacturer and a major polyethylene producer, Qenos Pty. Ltd., which supplies resin to Pact, went into voluntary administration in mid-April.
That occurred only days after its former owner, the Chinese government-owned China National Chemical (Hong Kong) Investment Co. Ltd., known as ChemChina, sold it to LAOP BidCo Pty. Ltd., a private company registered late last year, which is associated with the industrial and logistics property development company Logos Group.
LAOP appointed corporate advisory and restructuring firm McGrathNicol on April 17 as administrator for Qenos Pty. Ltd. and seven related companies.
McGrathNicol's initial report to creditors said the Qenos Group had received financial support of more than A$390 million (US$260.4 million) from ChemChina and its related entity, China National Bluestar (Group) Co. Ltd.
Qenos had losses of A$370 million (US$247 million) in the year to Dec. 31, 2023, and since McGrathNicol's appointment on Jan, 1, it lost A$326 million (US$217 million).
ChemChina had previously tried unsuccessfully to sell the business, before reaching the agreement with BidCo. McGrathNicol's report said the lack of ongoing funds from ChemChina contributed to the company's failure. That was exacerbated by:
• The collapse of a cooling tower at its Botany, Sydney, site in 2023.
• Soft polyethylene prices.
• Increasing costs in the Australian business environment, including higher energy prices.
• The high costs of additives, raw materials, packaging and freight.
• Material impacts to goods and services supplies because of the Russia-Ukraine war, war in the Middle East, high inflation and labor shortages.
Kin Group's initial bid valued Pact at A$234 million (US$156 million), but Geminder was forced to increase the price after an independent expert said the offer was "opportunistic" and "neither fair not reasonable" and Pact's board told shareholders to reject it.
Kin's bid, lodged via its wholly owned subsidiary Bennamon Industries Pty. Ltd., was increased in December 2023 from A68 cents a share to A84 cents a share, taking Pact's revised value to A$289 million (US$193 million). The independent directors then advised shareholders to accept, but that has been a slow build, with the time frame for acceptances being extended 14 times across nine months.
The 14th updated bidder's statement stated that there would be no further extensions.
In March, four disgruntled investors attempted to derail the bid process by lodging an application with the Australian Government's Takeovers Panel, a statutory authority established to resolve disputes about takeovers. The panel imposed an interim order to maintain the status quo while it considered the investors' complaints.
The panel eventually decided no investigation was required.
Pact was listed on the ASX in December 2013. The company manufactures plastic packaging for the consumer and industrial sectors and has operations in Australia, New Zealand, Asia, the U.S. and the United Kingdom.
It employs 6,000 people globally, with 3,000 across 60 facilities in Australia and New Zealand.