Ardagh seeks to raise hundreds of millions after €3bn deal

Irish financier Paul Coulson's Ardagh Group has revived plans to raise hundreds of millions of euro in equity, after unveiling a $3.42 billion (€3 billion) debt-funded deal to become the world's third largest beverage can manufacturer.

Luxembourg-based Ardagh is exploring selling shares to private investors or in the public markets to lower the group’s debt burden after the purchase, Mr Coulson told bond analysts yesterday.

“We will be focusing on raising equity from people who are keen long-term.”

Mr Coulson, the group’s chairman, also said he was unlikely to tap private equity firms, which typically seek short-term investments.

Ardagh, which has transformed from a small, Dublin-based, glass bottle maker into one of the world's largest metal and glass packaging groups in less than two decades, said it was buying 22 beverage can-making plants in Europe, the US and Brazil from US packaging group Ball Corp and UK peer Rexam.

Competition authorities

The assets are being sold by Ball and Rexam to appease competition authorities ahead of a planned merger in June.

To fund the deal, Ardagh also said it had launched a bond offering of $2.85 billion. It will also use some of its own resources, with €772 million of cash on its balance sheet at the end of March.

Mr Coulson’s renewed aim to tap equity investment comes two years after Ardagh abandoned a plan to sell a stake to private equity investors to focus on floating the business on the market. It subsequently pulled an initial public offering of its metals division late last year amid turmoil in global equity markets.

The assets being acquired had 2015 sales of $3 billion and earnings before interest, tax, depreciation and amortisation (Ebitda) of about $400 million. The deal will make Ardagh the third largest maker of cans for beer and soft drinks worldwide, number two in Europe and number three in the US and Brazil.

The acquisition is expected to close by the end of June, simultaneously with the closing of Ball’s acquisition of Rexam.

The $3.21 billion purchase price represents a multiple of seven times Ebitda including anticipated cost synergies.

While the purchase will increase Ardagh’s debt to almost six times Ebitda this year, from five times the figure at the end of March, Mr Coulson said he expected this to fall back to between four and 4½ times over the next few years following an equity raise and improved earnings.

Strong relationships

Mr Coulson, who owns about 35 per cent of Ardagh, said the deal would be “highly complementary” to the company’s metal and glass businesses.

“We are pleased to expand our consumer packaging business with the addition of a leading beverage can business,” he said.

“Whilst we do not currently operate in the beverage can market, the business we are acquiring is highly complementary to our existing metal and glass businesses. The acquired business has an excellent management team and strong customer relationships.”

The company brought forward its first-quarter earnings report to coincide with the announcement. It said first-quarter revenue of €1.2 billion represented an increase of 1 per cent at actual exchange rates and was 1 per cent lower at constant currency, compared with the same period in 2015.

Revenue in glass packaging of €743 million in the quarter increased by 1 per cent compared with the same period last year at actual exchange rates and was 2 per cent lower at constant currency.

Ardagh chief executive Niall Wall is to step down in September to be replaced by Ian Curley, formerly of Smurfit Kappa Group.