A quiet vote of confidence from investors for Pro-Pac’s $55 million capital raising aimed at completing the financing of a deal that will more than double the size of the company.
The $54.8 million capital raising, confirmed on Tuesday will partially fund the $177 million takeover of flexible packager Integrated Packaging Group (or IPG) that was revealed in September.
Existing shareholders are being offered fully paid ordinary shares on the basis of two new shares for every three existing shares at an issue price of 34 cents a share.
After dipping to as low of 41.5 cents in early trading yesterday (down 2.3%), the shares jumped in the afternoon to finish at 44 cents, up a solid 3.5%. If that price persists, shareholders taking up the offer will have a nice paper profit.
The acquisition of IPG is being funded by the capital raising – fully underwritten by Bell Potter Securities – as well as a combination of $60 million Pro-Pac shares issued to the vendors and $70 million from a new debt facility.
“The acquisition of IPG represents a significant milestone in the realization of Pro-Pac’s vision to become the preeminent flexible and industrial packaging manufacturer and distributor in Australia,” Pro-Pac’s Ahmed Fahour, executive chairman (and former chair of Australia Post) said yesterday.
“The opportunity to combine two very complementary businesses will deliver significant long-term value to Pro-Pac shareholders.”
The combined business will have annual sales of more than $450 million.
Pro-Pac has distribution facilities in Sydney, Melbourne, Brisbane, Perth and Adelaide as well as six manufacturing sites, providing flexible and rigid packaging solutions.
Integrated Packaging Group, formerly owned by private equity group Advent Partners, operates five manufacturing facilities across Australia and New Zealand, providing a wide range of stretch plastic film used to wrap consumer goods, building products and agricultural products.
The new entity will operate 22 distribution warehouses and manufacturing facilities in Australasia. It is another packaging group in a sector where Australia seems to produce world class business: there’s Amcor, its spin off Orora and the smaller Pact, as well as the privately-owned Pratt group here and in the US.