Owens-Illinois draws attention from buyout funds

Owens-Illinois is a glass packaging and bottles manufacturer Picture: iStock

Expectations are mounting that the Australian and New Zealand business of bottling giant Owens-Illinois will be purchased for a bullish price, as a long line of private equity firms start examining documents for the sale of the division.

While Kohlberg Kravis Roberts, Blackstone and The Carlyle Group are believed to be lining up for the glass packaging and bottles manufacturer, it is also understood that most of the major buyout funds have taken an information memorandum in the Goldman Sachs-run process, with groups such as TPG Capital, Bain Capital, BGH Capital, Pacific Equity Partners and possibly Brookfield taking a look.

Information memorandums were released to the market three days ago and first-round bids are due at the end of this month.

On offer are Owens-Illinois’ Australian and New Zealand operations only, with its Asia assets to be retained.

It is understood the big selling point for prospective buyers is the Australian properties where the O-I manufacturing facilities are located, particularly the redevelopment potential for its large riverfront site in Brisbane.

The pitch has been that a buyer could sell off the Brisbane land for a lucrative price and relocate its operations closer to its brewery customers in the Queensland capital. KKR embarked on a similar move with its acquisition of Arnott’s Biscuits.

Overall in Australia and New Zealand, Owens Illinois, or O-I as it is called, generates $140m of annual EBITDA and $750m of revenue. So far, strategic players are expected to be less in the picture than buyout funds.

But already, expectations are mounting that the assets will sell for a strong price — in the ballpark of $1bn — given the large number of private equity funds taking an interest.

O-I is offloading the division after facing shareholder activist pressure in the US from Atlantic Investment Management, which has been hopeful the group would sell off divisions following what it believes is a lagging company performance.

So far, The Carlyle Group looks to be perhaps the strongest contender, say analysts, given its credentials in the operationally intensive manufacturing space worldwide, and KKR has form in the packaging field. Sun Capital Partners, which has invested in packaging company Coveris, could also be a contender.

O-I is one of the world’s largest container glass manufacturers and is staging an exit from Australia following a global strategic review.

The New York-listed firm is also the largest glass producer in the Asia-Pacific and competes with listed Amcor spin-off Orora.

According to IBISWorld, the Asia-Pacific operations operate 12 glass plants across Australia (including in Adelaide, Brisbane, Melbourne and Sydney), New Zealand, China and Indonesia.