AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Orora Ltd, a leading manufacturer of glass bottles and cans, is undergoing a significant transformation following the sale of its North American packaging solutions business to Veritiv Corporation. The transaction, valued at $1.78 billion, is set to reshape Orora's operations and financial strategy.
Shares of Orora (ASX:ORA) saw a notable increase of 6% to $2.65 in early trading on Wednesday, reflecting positive investor sentiment following the announcement. The sale of the North American unit, which includes cartons, shrink wrap, and retail signage, to Veritiv—a company based in Atlanta, Georgia, and recently acquired by private equity firm Clayton, Dubilier & Rice—marks a strategic shift for Orora.
This move allows Orora to streamline its focus exclusively on its core business of manufacturing glass bottles and cans. The proceeds from the sale will be utilized to reduce debt and accelerate investment in the company’s existing operations. A significant portion of the funds, approximately $130 million, will be allocated to expanding the can manufacturing plant in Rocklea, Brisbane. This expansion is expected to enhance production capacity by about 13% and is projected to be completed by 2026-27.
Orora’s decision to sell the North American packaging solutions business follows challenges related to its 2022 acquisition of Saverglass, a historic French glass bottle maker. The acquisition has faced operational difficulties, impacting Orora’s share price and prompting a bid from US private equity group Lone Star. Orora recently declined Lone Star’s indicative proposal of $2.55 per share.
Orora CEO Brian Lowe highlighted that the divestment will enable the company to streamline its operations and focus on becoming a more specialized and efficient manufacturer. While the sale marks a significant shift in strategy, it remains uncertain whether it will influence Lone Star’s potential future offers.
In addition to debt reduction and the expansion project, Orora plans to use part of the sale proceeds for capital management, potentially returning funds to shareholders in a tax-efficient manner. The company had previously reduced its final dividend payout by 44% to 5 cents per share following a modest 0.2% increase in net profit after tax, totaling $185.2 million for the year ending June 30.
The sale, which values the North American business at a multiple of 9.9 times EBITDA for the 2023-24 financial year, is subject to antitrust approval. Should Veritiv fail to secure the necessary regulatory clearance, a termination fee of $62.5 million will apply.
As Orora continues to refine its focus and invest in its core operations, the company’s strategic moves are poised to strengthen its position in the glass bottle and can manufacturing sector.
