Pact Group an attractive takeover target for potential suitor

Pact Group chairman Raphael Geminder.

The $785m listed packaging company Pact Group is believed to be in the crosshairs of at least one suitor, according to sources.

It is thought at least one private equity firm and or infrastructure fund is considering a deal to acquire Pact and merging the Raphael Geminder-chaired business with its privately listed rival Loscam, which is up for sale through UBS and Goldman Sachs.

While Pact, founded by Mr Geminder in 2002, has been suggested as a possible suitor of the $2bn Loscam, buying the business would be a tough ask for Pact and instead it is believed that a more logical outcome for the company is a privatisation after years of it failing to fire on the stock exchange.

Pact listed in late 2013 with its shares selling at $3.80 each, but on Tuesday they closed at $2.22.

The business makes plastic and steel packaging and Mr Geminder holds a 47 per cent stake through his company Kin Group.

Its contract manufacturing business has struggled and had been on the market, but experienced a surge in its performance during the global pandemic when it pivoted to products such as hand sanitiser.

Pact delivered a $21m loss for the six months to December after a $65m writedown of its contract manufacturing division as it wrestled with supply chain pressures and soaring costs.

The contract manufacturing business of Pact includes the combined businesses of Jalco, Pascoe’s and Australian Pharmaceutical Manufacturers, which PGH acquired over the past six years. It provides manufacturing services for the home care, personal care and the health and wellness sectors.

Kin Group is the landlord for some of Pact’s assets and the thinking is that parts of the business remain interrelated to his private operations.

The sales process for Loscam Australia and New Zealand was due to launch at the start of this month and most major private equity and infrastructure funds were all expected to take a look.

Loscam’s Chinese owners China Merchants, CITIC and FountainVest Partners are holding out for a price of between 18 and 20 times its annual earnings of about $85m, which could see it sell for close to the $2bn mark.