Orora is understood to have hunted down Saverglass for a deal before its private equity owner revived a sales process, and the pair was understood to have been in bilateral talks for three to four months.
As first revealed by DataRoom, Orora has paid €1.29bn to The Carlyle Group for Saverglass, and the understanding is that it knocked on Carlyle’s door to sound out the buyout fund to determine if it would be a seller, having had its eye on its European glass business for some time.
Orora makes glass and cans for drinks in Australia and in North America, distributes packaging and makes corrugated cardboard.
It has looked at a number of opportunities in the United States, some of which were in packaging distribution, a lower-margin industry than manufacturing.
Carlyle then relaunched a sale process this year to create some competitive tension for Orora, attracting suitors such as Apollo Global Management, Lone Star and One Rock.
But their offers were far less, say sources.
Lone Star had offered to buy the business for €1.7bn in 2021 when Rothshild & Co first ran a sale process for Carlyle.
But the transaction was never completed, because Saverglass management was said to be not on board.
In this deal, all of Saverglass’s key management members will join Orora, so it’s not seen as a cost out project for the Australian group.
Saverglass makes bottles for fancy wine and spirits brands in Europe such as Grey Goose Vodka, Hennessy, Caldwell, Maison Mirabeau, Don Julio and Jose Cuervo. The $3bn, Australian-listed Orora hopes to capitalise on the booming luxury market with the purchase.
Other benefits of the deal mean that Orora can capitalise on its current strengths, and it creates opportunities to shift manufacturing to different operations around the globe should the company want to carry out capital spending in one area or if it becomes more cost efficient to manufacture from a facility in another geography where it operates.
It also creates opportunities to grow the Saverglass business into the North America market, capitalising on the extensive North American distribution network it has for its packaging business there after manufacturing glass at Saverglass’s new Mexican facility.
Most had expected that Orora would buy a packaging distribution business in the North American market, so Saverglass came as a surprise.
But Orora has proven itself to investors by its strong performance already in North America.
It’s a big bet for the group, but it either needed to gain scale or risk being bought and, despite the low Australian dollar, now was thought to be the right time given that private equity suitors have become less competitive with the higher cost of debt.
Sources have suggested that Orora’s original plan was to raise close to $1.6bn, but that got scaled back in recent days to $1.345bn, comprising $450m through a placement and $895m through a 1-for-2.55 entitlement offer, while also taking on $875m of acquisition debt financing.
The raising at $2.70 per share is a 21.3 per cent discount to the company’s last closing share price of $3.43 on Friday August 25, adjusted for the 9c dividend payment and 14.5 per cent to the theoretical ex-rights price (TERP).
It is a deal equating to 7.7 times €168m of adjusted earnings before interest, tax, depreciation and amortisation for the 2023 financial year, which is in line with other transactions in the industry.
It was a tough assignment in the currently volatile market conditions for both Macquarie Capital and Citi which were working on the raising.
It is understood that investment bank Citi alone provided the strategic advice on the deal, which will now propel the Wall Street bank up the local investment banking league table.
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