Apollo to buy RPC in $4.28bn deal


Financier Worldwide Magazine

March 2019 Issue

Following months of negotiation, US private equity firm Apollo Global Management is to acquire plastic packaging specialist RPC Group Plc in a deal valued at $4.28bn.

Under the terms of the transaction, RPC shareholders will be entitled to receive 782 pence per share, along with an interim dividend of 8.1 pence per share. Prior to the announcement of the deal, the deadline for Apollo to make a firm offer had been extended on five occasions.

Another US private equity firm, Bain Capital, had also been in talks to make a bid for RPC but dropped out of the running in December 2018.

An industry in the midst of a phase of consolidation, Apollo’s bid for RPC follows DS Smith Plc’s $2.2bn acquisition of Spanish rival Europac and Australia’s Amcor Ltd’s agreement to buy US firm Bemis Co for $5.25bn. A near miss was US paper company International Paper’s interest in acquiring Smurfit Kappa, which ultimately saw the latter walk away citing an undervaluation of its business.

It is intended that the acquisition will be effected by means of a court-sanctioned scheme of arrangement between RPC and the scheme shareholders pursuant to the Companies Act 2006. The purpose of the scheme is to provide for Apollo to become the holder of the entire issued and to be issued ordinary share capital of RPC. This is to be achieved by the transfer of the scheme shares to Apollo, in consideration for which the scheme shareholders will receive the consideration.

A Delaware limited partnership that manages a number of investment funds, Apollo – including Apollo Investment Fund IX, L.P., which comprises the Apollo Fund IX Group – and its affiliates are one of the leading global alternative investment managers, with assets under management (AUM) of approximately $270bn as of 30 September 2018.

Apollo’s acquisition, RPC, which operates in 33 countries and employs about 25,000 people, is Europe’s biggest plastic packaging maker, making a range of products including packaging for beverages, coffee capsules and healthcare products.

“The board believes that Apollo’s offer recognises the quality of RPC’s businesses and the strength of their future prospects,” said Jamie Pike, chairman of RPC. “In July 2018, I stated that differing investor views on the appropriate level of gearing was constraining the group’s ability to pursue opportunities for growth and, as such, putting pressure on RPC’s valuation. I also said that the board was working to resolve this situation. This acquisition is the culmination of that process.”

Despite Mr Pike’s comments, RPC shareholders are divided over the merits of Apollo’s bid, with many claiming the offer undervalues the prospects of RPC. Two of RPC’s biggest shareholders, Eminence Capital and Canyon, with stakes of around 7.6 percent and 7 percent, respectively, have backed the deal, Aviva Investors, which holds an approximate 2 percent stake, has rejected Apollo’s overtures.

“The exit valuation clearly underestimates future growth prospects that will now accrue to the buyer and the RPC management team,” said David Cumming, chief investment officer for equities at Aviva Investors. “The protracted bid process has not delivered fair value to RPC’s shareholders.”

Acting as legal advisers to Apollo are Sullivan & Cromwell LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP. Slaughter and May is legal adviser to RPC.

Mr Pike concluded: “The RPC board believes that the offer is a good outcome for shareholders and intends to recommend unanimously that the offer is accepted.”

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Fraser Tennant

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