Amcor Touches 45-Year High on Packaging Unit Spinoff PlanDavid Fickling
Amcor Ltd. touched its highest level since listing in 1968 after the world’s largest packaging company said it will spin off its Australian canning, bottling and carton business into a separate listed company.
The Australasia and Packaging Distribution unit, which had A$2.77 billion ($2.48 billion) in revenue last year, should be listed as a separate business by the end of December after routine court hearings and a shareholder vote, according to a company presentation. Amcor surged as much as 5.5 percent in Sydney trading before closing with a 1.4 percent gain.
The business, which makes wine bottles in South Australia state’s Barossa Valley as well as beer cans and corrugated boxes for food transport, has 36 plants and 78 distribution sites in seven countries, according to the presentation. First-half earnings before interest and tax at the unit fell 8 percent in the six months ended December, Amcor Chief Executive Officer Ken MacKenzie said in an investor call in February.
“The growth profile’s a bit slower,” Nathan Zaia, an analyst at Morningstar Inc. in Sydney, said by phone. If the companies are separated, “each division can focus on its own growth path and not be dragged down by the company saying ‘We’re going to put some money here to support this business’,”, he said.
Amcor climbed as much as 5.5 percent to A$11.17, the highest intraday level since 1968, before closing at A$10.74 in Sydney. The benchmark S&P/ASX 200 index climbed 0.2 percent.
The company has invested more than A$1 billion over the past six years in the packaging unit that it’s spinning off, building a new recycled paper mill in Sydney’s Botany Bay, a glass bottle furnace at Gawler in the Barossa, and a new drinks can production line in New Zealand, according to the company’s statement today.
That’s about 28 percent of total capital spending in the six years through June 2012, according to data compiled by Bloomberg. The division accounted for about 14 percent of Amcor’s earnings before interest and tax that year, according to the company’s last annual results.
“Although Amcor and AAPD are both packaging companies they are actually very different in terms of product segments and geographic focus,” MacKenzie said in a statement today.
The corrugated cartons and beverages business was little changed in the first half from a year earlier, while rising raw materials costs meant profits fell in the distribution business, Mackenzie said in February.
Sales from the glass-packaging business fell 34 percent during 2012 and the company dropped a forecast that a new bottle furnace would be needed every three years, after Australian wine-makers moved to shipping their product in plastic bladders rather than glass.
Packaging companies in developed countries with revenues of more than $1 billion are worth on average about 0.8 times their sales, according to data compiled by Bloomberg. That multiple would give Amcor’s spun-off unit a value of about A$2.22 billion, according to data compiled by Bloomberg.
The unit will have its current President Nigel Garrard as chief executive officer and Amcor board member Chris Roberts as chairman, the Melbourne-based company said in a regulatory statement.