Orora offers The Carlyle Group €1.29bn for Saverglass, raising $1.6bn

The Carlyle Group is in final negotiations to sell Saverglass to Orora. Picture: iStock

The $3bn Australian listed packaging company Orora is understood to have bid €1.29bn ($2.19bn) for European glass bottle maker Saverglass as it moves to tap the market for $1.6bn.

It is understood that investors were being briefed on terms for the raise on Thursday, with suggestions in the market that shares were being sold at a discount of about 25 per cent.

DataRoom has learned that Orora fended off private equity rivals in a competition to buy the France-based business that would almost double its size and make Europe the largest region where it operates.

Sources say that Orora was far ahead of other suitors on price, at a time that private equity bidders struggle to compete with strategic bidders due to the rising cost of debt they use to fund deals.

The question on the minds of shareholders and observers is the level of synergies that Orora would have buying such a business, given it manufactures wine bottles and cans for drinks in Australia.

In 2021, private equity firm Lone Star offered €1.7bn for Saverglass, but a deal never completed.

Advisory firm Rothschild & Co put the business back up for sale for Carlyle this year.

On Thursday, shares remained suspended.

Saverglass generated €118m in earnings before interest, tax, depreciation and amortisation in 2021, which was set to increase to €124m in 2022, €144m in 2023 and €175m in 2024.

According to the calculations from one analyst, if a deal was reached at €1.29bn, as speculated, it would equate to a multiple of between 9 and 10 times its EBITDA.

But stripping out the cost of the €112m new furnace Saverglass is building in Mexico, the multiple would be about 8 times.

Orora said on Wednesday negotiations were advanced and that it would take some days to finalise due to a number of factors, including the size and the global nature of the target business, the number of connected vendors in the seller group and the need to finalise funding arrangements.

Orora is raising the $1.6bn through Citi and Macquarie Capital to finance the transaction.

As reported by DataRoom on Wednesday, Orora chairman Rob Sindel, the former boss of building materials company CSR, had been contacted by some concerned shareholders about the deal.

They are nervous about the capital intensive nature of the glass industry, France from an industrial relations perspective, the currently low Australian dollar and poined to previous global transactions by Australian corporates that had not been a success such as the acquisition of building materials provider Boral of Headwaters in the US, where the assets were later sold at reduced prices.

Founded in 1897, Saverglass is a worldwide specialist in the design and manufacturer of bottles for premium wines and spirits.

It operates six glass and decoration facilities in France and one in the United Arab Emirates, employing about 2600 people globally.

The company sells 400,000 tonnes of glass annually in more than 80 countries.

Orora also operates in the US, where its core business is the distribution of boxes and plastic packaging.

It also manufactures corrugated board in the US and carries out contract manufacturing, which is easier to do in a bigger market.