Melbourne billionaire Ralph Geminder is taking his Pact (ASX:PGH) packaging group private after conceding that there was very little investor support for the stock.
The packaging group’s shares traded as high as $4.55 in 2021 but have since plummeted to just 68¢ due to losses, asset sales, and impairments.
At the 2021 price, the company had a value of $1.6 billion, but at the buyout price, it’s just $234 million. News of the proposed privatization saw the shares jump 8% to 73 cents compared to the 68 cents per share offer price.
Since Geminder owns 50% of Pact, the buyout will cost him around $170 million, but he will be taking on a company whose debt rose 4.4% to more than $580 million.
Pact stated that Mr. Geminder, the Chair of the Company, “has advised the Board of his conflict of interest in respect of the Offer and has recused himself from the Board and Committee consideration of the Offer for the duration of the Offer period.” In his absence, Mr. Michael Wachtel, the lead independent director, will chair the relevant Board and subcommittee meetings for the purposes of the Offer.
The bid is being made by the Geminder family-controlled Kin Group Pty Ltd, which announced that the bid will be made by its wholly-owned subsidiary, Bennamon Industries Pty Ltd.
Pact’s financial struggles were evident in its 2022-23 results, reporting a loss of $6.8 million for the year after $53 million in write-downs, despite slightly increased revenue at $1.9 billion. It reported an underlying EBIT for the year of $145.3 million, down $10.9 million or 7.0% lower than in 2021-22, with growth in the Contract Manufacturing segment ($7.3 million) more than offset by lower earnings in Packaging & Sustainability ($8.5 million) and Materials Handling & Pooling ($9.7 million).
Additionally, the company revealed the sale of a 50% stake in its crate pooling and crate manufacturing business for $160 million to infrastructure investor Morrison & Co. That deal was set to settle later this year. The company reported a $25 million rise in net debt at June 30, reaching $586 million, while cash on hand at June 30 fell more than 20% to just over $79 million, making the $160 million from the Morrison deal all the more crucial.