Amcor Limited (AMC) confirmed speculation by announcing it would buy Rio Tinto’s Alcan Packaging for $2.025 billion. At the same time Amcor said its net profit was down 18% to $212 million for the year to 30 June 2009.
Amcor also committed to a $1.6 billion capital raising as it seeks to gather the capital required following its binding offer to acquire four key Alcan packaging businesses across Asia and Europe.
Amcor said the acquisition would propel the Australian company to one of the leading global packaging businesses with stakes in flexible packaging, custom PET containers and folding cartons for tobacco packaging.
The transaction is expected to be EPS accretive in the first full financial year of Amcor’s ownership, expected to be FY11.
Amcor is raising A$1,611 million through a fully-underwritten 4-for-9 non-renounceable pro rata entitlement offer, at an issue price of $4.30 per share.
Amcor shares are currently halted at $5.65 per share.
Amcor’s managing director and CEO, Ken MacKenzie said the acquisition was at an ideal time as asset values were lower than they had been for many years.
“Following the successful implementation of “The Way Forward” program, we are well positioned to undertake this acquisition, enabling Amcor to create value for all its stakeholders,” Mr Mackenzie said.
Amcor also said it expected to achieve synergies with its current business operations saving between $200 million and $250 million per year. These would be achieved through reduced overhead costs, improved operating efficiencies, and procurement benefits.
However in the first two years integration costs would wipe $300 million from the company’s bottom line, the company cautioned.
Looking at the company’s annual results, profit after tax and before significant items of $360.5 million, down a more modest 2.3%.
Significant items after tax for the year ended 30 June 2009 cost the company $148.8 million, against an expense of $110.3 million for the prior period last year.
These included the Flexibles market sector rationalisation expense of $50.2 million, an expense of $23.3 million relating to the Fibre turnaround, the PET Packaging integration and restructure expense of $14.4 million.
The company reported operating cash flow $419.6 million, while free cash flow after the payment of dividends was $131.1 million.
Net debt on the balance sheet increased from $2.25 billion at 30 June 2008 to $2.64 billion at 30 June 2009 predominately due to the impact of a lower Australian dollar at balance date.
The company said it was particularly susceptible to foreign exchange movements as profits are repatriated back into Australian dollars.
The total impact of the lower Australian dollar on the translation of profit after tax into Australian dollars for the year was around $48 million. The effect of the currency movement was approximately $3 million for every one cent movement against the US dollar.
The company declined to give an outlook.
The directors declared an unfranked final dividend of 17 cents per share making the total dividend for the year 34 cents.
