Orora (ASX:ORA) has entered into a binding agreement to sell its Orora Packaging Solutions (OPS) business to Veritiv Corporation, an investee company of Clayton, Dubilier & Rice, for $1.775 billion on a cash and debt-free basis.
Veritiv, headquartered in Atlanta, Georgia, is a full-service provider of packaging, jan-san and hygiene products, services and solutions. Additionally, Veritiv provides print and publishing products. Serving customers in a wide range of industries in North America and globally, Veritiv has distribution centres throughout the US and Mexico.
The transaction is subject to customary conditions, including obtaining all necessary regulatory approvals from applicable governmental antitrust authorities. If all the conditions are met, the completion of the sale is expected to occur in late 2024.
The news follows Orora’s financial results announcement for the year ending 30 June 2024, where it revealed that the OPS business reported a loss of revenue by 10.8 per cent to US$1.954 billion (down 8.4 per cent to $2.981 billion on a reported basis) and that it intends to divest the unit.
Orora added that the loss was due to the flow-through impact of price deflation and lower volumes from continued softness in the broader North American manufacturing industry.
“As announced at the company’s FY24 results, a strategic review of OPS was undertaken with the objective of unlocking value for shareholders,” Orora said.
“The sale of OPS to Veritiv concludes a robust process spanning many months, and:
- Transforms Orora into a focused beverage packaging business, with market-leading positions and a defensive growth profile across beverage substrates and end-markets; and
- Leaves Orora with a strong balance sheet, providing flexibility to pursue value accretive organic growth opportunities, including additional Cans expansion projects.
“Veritiv’s offer fully values OPS and implies approximately 9.9x FY24A cash EBITDA, a premium to Orora’s trading multiple and relevant comparable transactions. The Transaction is expected to result in net cash proceeds of approximately $1.687 billion after tax, transaction costs and purchase price adjustments.”
Orora said it intends to bring forward $130 million of capital investment to further expand its Cans capacity in Rocklea, Queensland. The Rocklea expansion, in combination with recent and ongoing projects, is said to increase Cans capacity by more than 30 per cent.
The company also added that it intends to distribute surplus proceeds from the transaction to shareholders over time in a tax efficient manner to deliver a balance sheet that is consistent with a global beverage packaging business. More information on this will be provided later.
“Today’s announcement marks a new era for Orora as well as the OPS business as it transitions to Veritiv ownership. Veritiv’s interest in acquiring OPS provided us with an opportunity to realise an attractive valuation for shareholders and accelerate our strategy of becoming a speciality value-added beverage packaging player,” Orora managing director and CEO Brian Lowe said.
“This leaves Orora with a strong balance sheet, allowing the company to grow our beverage packaging business, including further investment in high returning projects such as the expansion of our Rocklea Cans facility in Queensland.
“We are extremely proud of the way the OPS business has grown and the value it has delivered whilst being part of the Orora Group. Veritiv’s offer is an exciting opportunity for the OPS team to join an industry leader in the North American packaging distribution market, with differentiated capabilities.”
