Amcor, Orora on lookout for packaging buyouts

Amcor is targeting companies involved in packaging for products such as shampoo and personal care items. Picture: Bloomberg

Two industrial companies to emerge from reporting season with an interest in mergers and acquisitions are Amcor and its offshoot Orora.

Food and consumer products packaging company Amcor demerged Orora as a $2bn Australian listed business in 2013, and both are looking at consolidating fragmented markets overseas for roll-up acquisitions.

For the $28bn Amcor, listed here and in New York, the focus is businesses involved in rigid packaging.

It’s not interested in businesses that make beverage containers because it already dominates that market.

Instead it is targeting companies involved in packaging for products such as shampoo and personal care items.

Its other area of focus is buying a business in the Asia-Pacific region that is involved with flexible packaging, likely to be in the area of food or healthcare. The flexible packaging market in the Asia Pacific is highly fragmented.

Amcor recently purchased a plant in the Czech Republic for $US50m.

Orora, meanwhile, is focused on packaging distribution acquisition opportunities in the US, in what is also a highly fragmented market.

The group operates in glass and can beverage solutions in Australia and packaging in the US and already owns the US-based Orora Visual marketing operation.

Amcor is more defensive than Orora, which is more a cyclical, lower-margin business.

After Nippon Paper purchased Orora’s Australian fibre business in 2019 for $1.72bn, some thought it would be a takeover target, but no suitors emerged.

Analyst Brook Campbell-Crawford from Barrenjoey said in a research note that Orora could consider debt-funding a deal of between $50m and $150m. He said it would remain in the middle of its debt target range of between 2 and 2.5 times its earnings.

Campbell-Crawford said Orora’s outlook commentary during its results was weaker than expected, particularly in Australasia, where it said earnings would be broadly in line with the 2022 financial year.

He said its North American earnings would be at risk if US economic growth and consumer demand slowed down.