Orora Limited (ASX: ORA) today announced that it has acquired Texas-based packaging and facility supplies company, Pollock Packaging, for A$110 million.
As per the terms of agreement, purchase consideration of A$110 million will be paid in two tranches. A$103 million will be paid upfront, and the remaining A$7 million payable in instalments at 6, 9 & 12 month milestones.
The acquisition will result into an addition to North America business of Orora Packaging Solutions which will enable OPS to expand its geographic footprints through Pollock’s distribution centres across New Jersey, Georgia, North Carolina, and California.
Orora Managing Director and CEO, Nigel Garrard stated that integration of Pollock to OPS’ business would drive significant growth in sales along with acquiring new customers and retaining the existing ones.
With this takeover, Orora targets to grow its facility supplies market segment, in addition to a strong packaging solution offering. As per the company’s information, the acquisition reflects a multiple of 8.7x trailing EBITDA.
Mr. Garrard stated that Pollock’s well-established business of facilities supplies will provide the platform needed for expansion of OPS’ key market segments growth. He added Pollock’s customer base will be driven to more advantageous position after having access to OPS’s wider supply portfolio and geographic footprint.
Pollock is into the business of packaging and facility supplies with six distribution centers located throughout Texas. Pollock also operates in-house packaging design service and corrugated box manufacturing plant in Dallas, Texas. Operating for 100 years, Pollock primarily serves the retail, industrial and facility supplies market segment and generate revenues more than A$355 million.
Mr. Garrard stated that Pollock is backed by a strong team of management that will remain in place to ensure successful integration of Orora and Pollock businesses and delivery of anticipated synergies. As per the company’s information, all key management of Pollock has signed two-year agreements which includes a team of experienced, stable and proven members.
Orora Limited told that significant synergies are available over the first 2-3 years totalling approximately US$6 million per annum. Earn-out of up to US$2 million are reportedly payable ~12 months after completion based on business growth of greater than 8.5% in first year. Further the deal is reported to be returns accretive with the target to meet 20% RoAFE by 3rd full year of ownership.
On the news of acquiring facility supplies business, Orora share price surged 3.165% to last trade at $3.260 on 29 November 2018. ORA last traded at a PE ratio of 17.850x with market capitalization of $3.81 billion. The stock has seen a negative change of 4.82% in 12 months.
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