Source: Bloomberg
Company Description
We see the following key risks to our investment thesis:
Amcor (AMC) has announced that it will acquire Bemis (NYSE: BMS) in an all-stock US$6.8bn transaction, which is unanimously supported by the Boards of both companies. The combined group will have revenues of US$13.0bn and EBITDA of US$2.2bn. Following the transaction, AMC shareholders will own 71% and Bemis shareholders 29% of the combined company. The combined group’s primary listing will be on NYSE and secondary list on the ASX via CDIs.
Strategically, the acquisition makes sense to us, however financially it always does raise questions as to whether synergies will drive EPS accretion. Management was absolutely adamant (this is to be expected!) that synergies have been thoroughly assessed by both companies and in fact there is upside risk to this figure if revenue synergies are to be achieved.
We highly rate the management team of AMC and therefore are more inclined to give them the benefit of the doubt. The deal is EPS accretive (including synergies) but returns diluted (acquisition will not hit AMC’s stated strategy of ROFE of 15-20%).
1. All-stock offer for BMS at a fixed exchange ratio of 5.1 shares for each existing share of BMS.
2. Both companies will merge into a newly created holding company (“New Amcor”) incorporated in the U.S. with an intended tax domicile in the UK.
3. New Amcor will be listed on the NYSE and the ASX.
4. Takeover is subject to all regulatory approvals.
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Source: Company
Figure 3: AMC & BMS transaction – EPS accretion analysis
Source: Company, BTIG estimates, Thomson Reuters.
Figure 5: Combined group’s reach and product offering
Figure 6: Transaction structure
Figure 7: AMC Financial Summary
Source: BTIG, Company, Bloomberg
Amcor Limited (AMC) is an international integrated packaging company offering packing and related services. Amcor primarily produces a wide range of packaging products which include corrugated boxes, cartons, aluminum and steel cans, flexible plastic packaging, PET plastic bottles and jars, and multi-wall sacks. The company has operations in Australasia, North America, Latin America, Europe and Asia.
1st March 2020
1st October 2019
25th September 2019
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