The chair of publicly listed Australian packaging giant Pact Group Ltd. has launched a takeover bid that aims to convert the firm to a private company.
The move comes only a month after Melbourne-based Pact sold 50 percent of its reusable plastic crate pooling business for A$160 million (US$103 million) to global infrastructure investment manager Morrison & Co. Ltd.
Documents lodged with the Australian Stock Exchange (ASX) by Pact Chairman Raphael Geminder's family-owned company Kin Group Pty. Ltd., which he also chairs, value the bid at A$234 million (US$150 million).
Pact's ASX statement said Geminder has advised the board of his conflict of interest and recused himself from the board for the duration of the offer period, which will be open for a month.
Pact said the directors had not yet decided whether to recommend the offer to shareholders. News reports said the board is seeking independent advice on whether the offer is fair. Pact's share price has risen since the ASX announcement.
Kin Group, which, with other Geminder family companies, already owns 50 percent of Pact, lodged the bid in the name of its wholly owned subsidiary Bennamon Industries Pty. Ltd.
Kin Group Managing Director Nick Perkins said in an ASX statement that Pact faces "a challenging operating environment with supply chain disruptions, inflationary pressures, fluctuating resin prices, labor constraints and macroeconomic uncertainty," which impact on its operational and financial performance.
Kin Group supported the 50 percent sale of the crate pooling business but said that reduced available cash flow.
The crate business operates a network of wash and distribution facilities for crates used by Australian and New Zealand retailers in their fresh produce supply chains. The crates are manufactured and recycled at Pact facilities in Australia.
In July, Pact and a major supermarket retailer, Sydney-based Woolworths Group Ltd., extended their crate pooling contract, originally signed in 2016, for another 10 years. Pact said the contract generates more than A$50 million (US$32.2 million) annually. Pact also negotiated a long-term contract extension with another major supermarket retailer, Aldi Australia, a wholly owned subsidiary of Austrian supermarket company Hofer KG.
Morrison partner Mark Mudie said buying half the crate business enabled it to "gain exposure to the circular economy thematic. Each reusable, recyclable crate replaces up to 140 units of single-use packaging."
Perkins said privatization and additional investment would enable Pact "to achieve its long-term strategy of growth in the circular economy."
The company had net debt of A$586 million (US$377.3 million) as of June 30, having spent A$130 million (US$83.7 million) on capital expenditures in the last fiscal year. It forecast spending A$85 million (US$54.7 million) on capital projects in the year ending June 30, 2024.
Perkins said Pact paid no dividends to shareholders in the past financial year and, given Kin's 50 percent ownership, no competing offer was likely.
Geminder, who appears in newspaper The Australian Financial Review's annual rich list with an estimated current fortune of A$1.3 billion (US$837 million), founded the diversified investment Kin Group in 2000. It owns packaging, food and beverage, and property portfolios. Geminder founded Pact Group in 2002, which listed on the ASX in December 2013.
In early August, a Pact statement said the company had installed new fully automated injection molding, blending and materials handling machinery at its Braeside, Victoria, plant, enabling it to expand recycled content in its Sulo-branded mobile household garbage bins.
The bins can now be made with up to 80 percent recycled content, depending on the color.
Pact recycles old and damaged waste and recycling bins and lids, and high density polyethylene plastic bottles and containers to make resin for the new bins. It has supplied more than 20 million of what Australians call wheelie bins to municipal councils and other customers.
The new bin manufacturing equipment is part of a A$76 million (US$48.9 million) upgrade to Pact Group packaging facilities around Australia, which is supported by A$20 million (US$12.8 million) in Australian government funding under its Modern Manufacturing Strategy.
Pact 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.