Orora an attractive package for private equity after share price dives

Orora focuses on packaging products such as glass bottles, beverage cans and corrugated boxes.

Private equity firms are believed to be busy scanning the listed market for more takeover targets and some say they are dedicating an increasing amount of time to manufacturing company Orora.

This comes only days after The Carlyle Group and Pacific Equity Partners lobbed a $2.8bn bid for Link Administration.

Orora focuses on packaging products such as glass bottles, beverage cans and corrugated boxes and many expected it to break up last year after Nippon Paper Industries purchased its Australian fibre business for $1.72bn.

Since the COVID-19 crisis began, Orora’s shares have fallen dramatically, from about $4 at the start of the year to about $2.50, and its market value is now $2.47bn.

This puts it well within the grasp of a number of funds.

One deterrent is that the US operations of Orora have underperformed, but one factor that makes the company attractive to private equity is that it owns its own real estate.

After the recent $3.2bn acquisition of Arnott’s Biscuits, Kohlberg Kravis Roberts offloaded the manufacturing sites to real estate investors, while trade player Visy sold the manufacturing sites of Owens Illinois in Australia to Charter Hall after buying the business for $1bn.

Glass bottle manufacturer Owens Illinois sold its Australian and New Zealand operations last year and in this market, it is considered Orora’s key competitor.

Many consider Orora a far superior business.

The underbidders in the Owens Illinois process are expected to line up for the listed Orora, including Pacific Equity Partners, Blackstone and KKR.

In Australia, Orora controls 70 per cent of the wine bottle manufacturing market, but only 10 per cent of the beer bottle market. O-I has most of the remaining beer bottle manufacturing market in Australia, making it the dominant player.