2018 has been a big year for mergers and acquisitions in Australia, and packaging giant Amcor (ASX:AMC) adds to that list with its Acquisition of Bemis Company, Inc. (NYSE: BMS). In a US$ 6.8 billion ($9.2 billion) all scrip stock buyout of Bemis, Amcor will shift its main share market listing to the New York Stock Exchange, saying goodbye to the Australian Securities Exchange (ASX) as its primary home.
The market had mixed reactions to the announcements, as Amcor shares dropped just over 6% coming out of its trading halt. However, the fact is, it makes far more sense for Amcor to be listed in the US than Australia. The company makes approximately 85% of its revenue from the Americas, Europe and Middle East markets. Additionally, Amcor reports its earnings in US dollars, and the acquisition of Bemis will provide greater exposure to the U.S. market.
Amcor chief executive Ron Delia said the anticipated cost savings of US$180 million by end of the third year from bringing the two businesses together was a conservative figure. The savings would come from synergies in procurement, manufacturing and administration. Delia said those synergies were focused merely on cost and didn’t take into account growth benefits and cross-selling opportunities from running a business with over $US13 billion in combined total revenue.
The new group will have a market capitalisation of US $17 billion.
The deal didn’t come out of the blue. Amcor has approached Bemis about a year ago on a possible merger, but both parties couldn’t reach an agreement on structuring the deal. But a spike in resin cost from the surging oil prices had squeezed margins across the industry and had made Bemis more eager to be part of a larger global organization.
Bemis operates 56 packaging plants across 12 countries, with most of its operations in the US. In contrast, Amcor operates 195 packaging plants across 43 countries.
Amcor will issue 5.1 of its shares for each Bemis share, in a transaction valuing Bemis at $US57.75 per share.
Mr. Dalia said the merger of the two groups made sense in an industry that was undergoing consolidation as big global consumer goods companies increasingly wanted their suppliers to have a global footprint.
The “new” Amcor will have a primary listing on the NYSE and existing Amcor shareholders will have the option to receive one New Amcor ASX-listed CHESS Depositary Interests (CDI) or one new Amcor NYSE-listed share for each Amcor share held. The deal is expected to be finalized in the first quarter of calendar 2019 and requires approval from shareholders of both companies, and regulators.
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