An Australian billionaire's takeover bid for major plastics manufacturer Pact Group Holdings Ltd. has been stymied by a group of disgruntled investors.
Four corporate shareholders in Melbourne-based Pact filed an application with the Australian Government's Takeovers Panel, a statutory authority established to resolve disputes about takeovers.
The takeover bid began in September by Pact Chairman Raphael Geminder's family-owned company Kin Group Pty. Ltd. in the name of its wholly owned subsidiary Bennamon Industries Pty. Ltd. Geminder, whose private family companies already owned 50 percent of Pact, is listed in The Australian Financial Review newspaper's 2023 annual "rich list" as being worth A$1.3 billion.
The four private companies — Manipur Nominees Pty. Ltd., Shriar Consolidated Pty. Ltd., Stanningfield Pty. Ltd. and Gandur Superannuation No. 3 Pty. Ltd. — told the Takeovers Panel that an email from Kin Group issued to selected shareholders on March 12 about the planned delisting of Pact from the Australian Securities Exchange (ASX) was "misleading" and "confusing."
They asked the panel to stop Bennamon buying more Pact shares and to stop processing bid acceptances until the panel can investigate.
The panel's acting president Richard Hunt has issued an interim order that says Bennamon "must not take any steps, and must ensure no steps are taken by any person, to process any acceptances received from Pact Group shareholders."
An interim order maintains the status quo until the investors' complaints are investigated or the panel decides not to proceed and rescinds the order.
The complainants also asked that any shareholder who accepted the bid offer after March 12 be permitted to withdraw their acceptance. The four companies' panel application said the March 12 email "constitutes a threat of an imminent delisting to coerce shareholders into disposing of their shares," which could breach Australia's Corporations Act 2001.
The four applicant companies, which told the panel they did not receive the email, said the threat could force shareholders who would not otherwise have accepted the bid to change their minds.
Kin Group has now issued its 10th updated bidder's statement since the takeover was launched. While the statement makes no reference to the Takeovers Panel application, it says the new statement is to "clarify and restate Kin Group's intention to have Pact delisted as soon it is able to do so." It also extends the date for acceptances to April 30.
Kin, via Bennemon and other Geminder-owned companies, now has 87.18 percent of Pact shares but, under Australian law, it cannot compulsorily acquire the rest until it reaches a 90 percent threshold.
To delist the company without reaching 90 percent requires the Pact board of directors to apply to the ASX for permission to do so. Kin's 10th updated statement says when the offer closes it intends to appoint Kin Group nominees to the Pact board to comprise a majority.
It warns recalcitrant shareholders: "If Pact is delisted, there would be no ongoing public market for Pact shares. This may pose an investment risk to you as it may be difficult to sell your shares in a delisted environment."
However, Kin also notes that it does not comply with an ASX ruling that the board cannot seek a delisting unless the number of Pact shareholders (other than the bidder and its related companies) with holdings valued at more than A$500 is fewer than 150.
The Australian newspaper has reported that the four disgruntled shareholder companies are associated with two former Pact Group business partners, David Harris and Mark Gandur, who have "built a potential blocking stake of 6 percent in Pact."
The newspaper says Harris and Gandur, who are co-directors of Melbourne-based TIC Group Pty. Ltd., a logistics and supply chain company serving the retail industry, sold a clothing hangers and security tags business to Pact in 2018 and are now "locked in a legal battle" over a A$30 million (US$19.5 million) earnout payment.
Pact's 2023 annual report notes that TIC Group and Pact's dispute is before the Commercial Court of the Supreme Court of Victoria. The report said Pact is "vigorously defending" TIC's claim for A$30 million plus interest and costs, saying no earnout amount is payable. Pact said no date has been set for a trial.
Plastics News reported the purchase of plastic garment hanger and accessories recycling business, TIC Retail Accessories Pty. Ltd. (TICRA), a division of TIC Group Pty. Ltd., in September 2018.
It said Pact, which had sales of A$1.67 billion (US$1 billion) in the fiscal year to 30 June 2018, paid A$122 million (US$79.5 million) for TICRA. The purchase, Pact's sixth major acquisition since its then CEO and MD Malcolm Bundey joined the company in December 2015, was abruptly followed by Bundey's sudden departure from the role.
Pact was launched in 2002 after Geminder bought the industrial packaging operations of Visy Industries Pty. Ltd., a company owned by his father-in-law, the late Richard Pratt. His brother-in-law, Anthony Pratt, is now executive chairman of Visy Industries, the world's largest privately owned packaging and paper company. Forbes has estimated Pratt's 2024 worth at US$10.6 billion.
Pact was listed on the ASX in December 2013, with Geminder retaining a large interest. The company grew significantly from 2015 until 2018, through organic diversification and acquisitions.
The takeover bid initially valued Pact at A$234 million (US$152.7 million), but Kin Group was forced to increase the price last December after slow shareholder acceptances, taking Pact's revised value to A$289 million (US$188.5 billion).
An independent expert said the chair's bid was "opportunistic" and the company's true value was between A$366 million (US$238.8 million) and A$520 million (US$339.3 million).