Owens-Illinois’ bottler assets lure bidders

Owens-Illinois’ real estate assets are believed to be front and centre of the bidders’ minds as the competition for the Australia and New Zealand operations of the American business enters the final stages.

Left in the race is Australian trade buyer Visy, which is believed to be having discussions with top Owens-Illinois executives in the US about an acquisition, along with New York-based private equity firm Blackstone.

However, the local private equity firm Pacific Equity Partners is seen by some as the frontrunner in the contest, given its previous experience in manufacturing.

Big issues are being worked through for all the parties involved, including the earnings impact from the growing move towards glass bottles rather than cans for beverages and whether a sale of the Owens-Illinois real estate assets are actually possible.

The large Owens-Illinois site on the Brisbane riverfront has especially caught the attention of private equity, with the possibility of selling the land and relocating the operations closer to the Owens-Illinois brewery customers.

Kohlberg Kravis Roberts embarked on a similar move with Arnott’s Biscuits.

One view is that a sale of the real estate assets may not be as easy as some had earlier believed.

Working for PEP is believed to be Credit Suisse, while Blackstone has Macquarie Capital as its adviser for the manufacturing operations that are thought to be worth about $1bn.

Earlier in the contest were Bain Capital, BGH Capital and the Carlyle Group, advised by UBS, while rival Orora also mulled a potential deal.

However, all of those groups are now out of the competition after second round bids were due on December 19.

Overall in Australia and New Zealand, Owens-Illinois, generates $140m of annual EBITDA and $750m of revenue from its glass bottle and container manufacturing operations that the American-based company is selling through Goldman Sachs.

It comes as the group grapples with asbestos-related lawsuits back in the US related to one of its subsidiaries.