Pactiv Corp., the maker of Hefty trash bags, is in talks to be bought by Apollo Global Management LLC, according to a person with knowledge of the discussions. The shares jumped the most in more than a year.
A transaction may be weeks away, said the person, who declined to be identified because discussions could collapse. As of last week, Pactiv, based in Lake Forest, Illinois, had a market value of about $3.2 billion.
Pactiv, which also makes cups, cutlery and plastic packaging under the Hefty brand, got more than a third of its $3.4 billion in sales from that division last year. Apollo, run by billionaire Leon Black, could merge Pactiv with its Berry Plastics Corp. to lower expenses for the material, Robert W. Baird & Co. analyst Ghansham Panjabi said in an interview.
“Plastic packaging needs a fair amount of consolidation,” the Roseland, New Jersey-based analyst said. “This would make perfect sense -- you could combine it with Berry and at some time decide what to do with it.”
Pactiv would sell for between $34 and $38 a share, Panjabi said. That would value the company at as much as $5.05 billion, based on the number of shares outstanding April 30. Panjabi has an outperform rating on the shares.
Pactiv rose $4.47, or 19 percent, to $28.44 at 4:01 p.m. in New York Stock Exchange composite trading. The gain was the largest since April 2009.
The packaging maker, led by Chief Executive Officer Richard Wambold, posted a 6 percent drop in revenue last year as consumers spent less during the economic slump. Pactiv also makes food-storage containers used by delis, restaurants and grocery stores for take-home meals.
Pactiv started as Packaging Corporation of America a unit of Tenneco Inc. Tenneco spun the division off in 1999. The company uses plastic in products that make up 80 percent of its sales. The company had about $1.4 billion in long-term debt as of last quarter.
Apollo bought Berry Plastics in 2006. Charles Zehren, a spokesman for New York-based Apollo, declined to comment. The Wall Street Journal reported the talks earlier today.
Private equity firms are taking advantage of a rebound in leveraged lending to put their capital to work after a two-year drought in deals. LBO funds worldwide have about $500 billion of unspent committed capital, according to researcher Preqin Ltd.
Excluding infrastructure investments, the biggest private equity purchase since July 2007 was that of IMS Health Inc. The company agreed last year to sell itself to a group including TPG Capital for about $5 billion, including debt. By comparison, in the first half of 2007, there were seven buyouts worth more than $15 billion, led by KKR & Co.’s takeover of TXU Corp. for $43 billion, including debt.