In a significant corporate development in Australia’s packaging industry, Kin Group Pty Ltd, an investment company controlled by the wealthy Geminder family, has unveiled a bold takeover bid for Pact Group Holdings Ltd (ASX: PGH).
The Geminder family has a deep-rooted history with Pact Group, as the company was co-founded by Kin Group's chairman, Raphael Geminder, and his wife Fiona Geminder in 2002. This takeover bid, valued at $234 million, could potentially return Pact Group to familial hands, reshaping the landscape of Australia's packaging industry.
Pact Group Holdings Ltd, Australia's largest packaging company, has faced a series of challenges recently, including supply chain disruptions, inflationary pressures, fluctuating resin prices, labour constraints, and macroeconomic uncertainty.
These factors have contributed to a decline in the company's share price, which once reached heights of approximately $4.50 in August 2021 but currently hovers around 67.5 cents. In FY23, Pact Group reported a net loss of $7 million despite a 6% increase in revenue to $1.95 billion. Its underlying EBIT also fell by 7% to $145 million.
The bid
Kin Group's wholly-owned subsidiary, Bennamon Industries Pty Ltd, has proposed an unconditional all-cash takeover bid at 68 cents per share for all ordinary shares in Pact Group. This offer comes as Kin Group emphasises its belief that private ownership would better serve Pact's interests, given the company's challenges and its ambitious goals, including a shift towards recyclable packaging and the circular economy.
Importantly, Raphael Geminder, who is the chairman of both Kin Group and Pact Group, has recused himself from Pact's board and committee discussions regarding the offer due to his conflict of interest.
Pact's response
The board of directors of Pact Group (PGH) has not yet issued a formal recommendation to shareholders regarding the takeover bid. In response to this development, a special board committee of independent directors, known as the Independent Board Committee (IBC), has been established.
The IBC has appointed Flagstaff Partners Pty Ltd as financial advisers and Herbert Smith Freehills as legal advisers to evaluate the offer. Additionally, Kroll Australia Pty Ltd has been enlisted to prepare an independent expert's report to assess the fairness and reasonableness of the offer.
Kin Group’s offer must remain open for at least one month after it is sent to shareholders. Pact shareholders will have time to make a decision in regard to the offer.
Pact Group says it remains "business as usual" for Pact’s business activities and operations, as it continues to focus on its circular economy strategy in order to deliver value for customers, partners and shareholders.
Market response
Upon the announcement of the takeover bid, Pact Group's shares experienced a notable increase, rising by 6% to 71.5 cents. Investors seem optimistic about the potential offer, which offers a small premium above the previous closing price. However, shareholders have been advised by the PGH board to "take no action" until a formal recommendation is issued.
The Geminder family Kin Group's takeover bid for Pact Group Holdings marks a significant development in Australia's packaging industry. The bid, if successful, would bring Pact Group back under familial control and potentially provide a path forward for the company amidst challenging market conditions.
The Independent Board Committee's evaluation, the appointment of independent advisers, and shareholder reactions will be critical factors to watch in the unfolding of this corporate saga.
