Australia’s Orora to sell North American packaging arm to CD&R-backed Veritiv

Industry:    3 months ago

Australia’s Orora said on Wednesday it would sell its North American packaging business to U.S. private equity firm Clayton, Dubilier & Rice-backed Veritiv for an enterprise value of A$1.78 billion ($1.19 billion), sending its shares soaring.

Shares of the Melbourne-based packaging firm rose as much as 10% to A$2.75, their highest level since mid-February, while the benchmark stock index fell 1.5% in broad-based selling.

Orora will receive nearly A$1.7 billion in net cash proceeds from the sale and plans to use the funds to reduce debt and put in A$130 million for the expansion of its Rocklea cans facility in Queensland.

The company said last month that it had placed Orora Packaging Solutions (OPS) under strategic review.

The acquisition will help Veritiv accelerate its strategy of becoming a specialty value-added beverage packaging player, Orora CEO Brian Lowe said in a statement.

The sale proceeds will help Orora deleverage its balance sheet and that will be investor friendly, said John Lockton, head of investment strategy at investment analysis platform Sandstone Insights.

“The market had been concerned that Orora’s leverage ratio was too high,” he said.

Orora had last month rejected a $2.5 billion takeover offer from U.S. private equity firm Lone Star Fund, saying it materially undervalued the company.

“Lone Star’s approach to taking over ORA now looks even more opportunistic. Board will have no appetite to engage,” Lockton said.

Orora expects the sale to packager Veritiv to complete in late 2024, it said.

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