Apollo’s proposed takeover of RPC under scrutiny

  • Jan 26, 2019 GMT
  • Team Kalkine
Apollo’s proposed takeover of RPC under scrutiny

The RPC Group, one of Europe’s largest plastic packaging business giant, headquartered in the United Kingdom, has come under scrutiny from its existing shareholders due to its latest takeover proposition talks with Apollo Global Management, the American private equity firm.

In a recent negotiation, the RPC group declared that it was planning to accept the EUR3.3-billion acquisition offer from Apollo after months of negotiation. The announcement sparked a lot of resistance and debate amongst the investors who consider the deal as unfair and undervalued.

One of the major investors and UK-based investment management company, Royal London Asset Management expressed its disappointment and protested the 782p-per-share cash offer from Apollo that RPC recommended to all the shareholders. Royal London constitutes RPC’s top 20 investors and holds a 1.4% stake valued at EUR45 million.  In addition, Aviva Investors, another asset management company and shareholder in RPC, also stands in disapproval while considering the bid offered as an unfair value to the investors in the business.

The investors, believing in RPC’s track record of offering attractive dividend streams, have been expecting a takeover to be undertaken at a premium of about 30% to the company’s undisturbed share price. While, adding an 8.1p dividend that RPC is due to pay the shareholders, Apollo’s bid is only 15.6% above the packaging group’s share price just before the company confirmed that it was in talks over acquisition in September.

RPC since inception has been working as a global design and engineering company catering to packaging and non-packaging markets and with  a turnover of above EUR 3.7 billion, and having presence among sectors such as food, non-food, beverage, personal care, healthcare, etc. across over  30 countries.

The company released its strategy, Vision 2020: Focused Growth Strategy in 2013, which emphasised on building opportunities for focused growth organically through their leading product and process innovation capabilities. It also entailed strategizing to consolidate the Europe market through acquisitions, thereby expanding their global presence and utilising their core competences in non-packaging solutions.

Despite the questions raised, the board members at RPC support the bid offered and affirmed that the valuation was good enough to incorporate the quality of business lines and strength of their future growth prospects. The global economic landscape is still rocky and plastic packaging far from a lucrative investment sector. Moreover, the company’s past performance has been moderate through the last year and there has been a rising concern in the UK and Europe over use of plastic products leading to environment contamination. Although, RPC claims that most of its products are recyclable.

Apollo, since its foundation in 1990, is now one of the world’s largest alternative investment managers, which has showcased consistent and rigorous value-oriented approach across private equity, credit, and real assets serving many of the world’s prominent institutional investors. The collaboration with Apollo will only provide an edge to the company and pursue more growth opportunities in the future. Moreover, Apollo has ruled out any scope of raising the final offer.

In the last one month, RPC’s (RPC) FTSE 250 London Stock Exchange-listed share rose as much as 16.7% and the stock was trading at GBX 764.98, up by 0.26% on January 25, 2019. While at the same time, Apollo’s shares (APO) were up 2.6% at USD 27.9 on the New York Stock Exchange.

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