Will Coulson pop the tab for his Ardagh disciples after drink cans unit flotation?

AMP’s stock market listing managed to avoid recent vagaries in IPO market

Paul Coulson's Ardagh Group may have failed to convince the European General Court last month that the sound of its metal packaging unit's drink cans opening, followed by about nine seconds of fizzing, deserved a trade mark – on the basis that it was not "distinctive enough".

The Dubliner’s financial markets nous, however, is in a league of its own.

Coulson's decision to proceed with a separate New York listing of his group's Ardagh Metal Packaging (AMP) aluminium cans unit through a merger this week with a so-called blank cheque company that floated 12 months ago, rather than going through a direct initial public offering (IPO), looks inspired given the recent volatility in the US IPO market.

Just ask Carl McCann. The McCann-led fruit and vegetable distributor Total Produce took to the New York Stock Exchange last week after merging with US rival Dole Foods and floating under a new name, Dole plc. The whole exercise was designed to take advantage of the traditional premium at which US companies trade to European peers and raise fresh funds in the process to pay down debt.


However, it emerged in the final days of Dole's IPO last week that its seven investment banks – including Goldman Sachs, Deutsche Bank and Davy – had gotten ahead of themselves, touting the new shares at $20-$23 (€17 – €19.50), at a time when Wall Street was well known to be awash with flotations vying for attention.

Dole was competing for investors alongside 18 other US IPOs last week – including the Robinhood stock-trading and Duolingo language-learning apps – the most in a week since 2000.

It was decided that the price range should be cut to $16-$17 and that Dole issue more shares to hit its $500 million fundraising target. Meanwhile, Dole Foods’ main shareholder, Los Angeles-based Castle & Cooke, scrapped a plan to take some money off the table by placing some of its shares.

The IPO ended up being priced at the bottom of the lowered range in a buyers’ market. Dole, at that stage, was no different to a street trader trying to flog a pile of lettuce before a long weekend. Pulling the deal was not an option, as it would have scuppered the entire merger. On debuting on the market last Friday, Dole sank to $14.50.

While the stock has since rallied from its lows, the episode will have left a bitter taste in the mouths of Total Produce’s existing investors, who have ended up with a 57 per cent of the Dole plc.

AMP’s stock market listing on Thursday, on the other hand, managed to avoid the recent vagaries in the IPO market.

Gores Holding V

The boom in IPOs in the past year or so of cash shells – or special purpose acquisition vehicles (SPACs) – has attracted its fair share of colourful promoters and led to some questionable follow-on purchases. These vehicles typically have just 18 to 24 months to spend the cash, or facing having to hand it back to investors.

But Ardagh’s long-awaited reversal this week of AMP into an SPAC, called Gores Holding V, appears to have been a good deal for both sides. The original agreement back in February locked in an enterprise value of $8.5 billion for AMP, equating to 13 times earnings before interest, tax, depreciation and amortisation (ebitda) estimates for this year.

At the time, the wider Ardagh Group, where the glass containers business makes up more than half of total earnings, was trading at eight times company forecasts for this year.

Coulson's play for more than two decades after buying an initial stake in Ardagh's predecessor, the Irish Glass Bottle Company, in 1998 and taking over as chairman has been simple. Build by acquisition, leverage up the bigger group and scrape out cost savings in a sector where growth has traditionally been linked to gross domestic product (GDP).

The Cooler’s timings in dipping in and out of the junk bond market to fund deals – and special dividends for himself and hundreds of small investors since the original company was taken private in 2003 – have been well documented. He even acquired the beverage cans business five years’ ago, in a largely debt-funded $3.4 billion (€2.9 billion) transaction, at a time when observers were expecting him to start paying down borrowings.

In recent years, however, environmental concerns have turbocharged demand for glass, metal and other sustainable packaging turning this into a growth sector. In addition, the whole area of environmental, social and governance (ESG) investing, which has expanded at pace in the past decade, has just taken off during Covid-19.

AMP chief executive Oliver Graham told a conference in June that about three-quarters of new drinks product launches in North America are now in cans and that a shift of only 1 per cent of the current plastic containers markets to aluminium translates to a 5 per cent increase in total industry demand for beverage cans. The group is in the middle of a $1.8 billion investment programme to try and keep up with its customers' plans.

Ardagh Group has received $3.3 billion in cash from the AMP spin-off and retains an 82 per cent stake. Coulson’s own interest, via an indirect 33 per cent holding in Ardagh Group, equates to about 27 per cent.

Coulson has raised the prospect of owners of the tradable 8 per cent stake in Ardagh Group (following its own IPO in 2017) being offered a chance in the future of swapping their shares for AMP stock.

But what about the long-standing investors that have remained locked up in a holding copy at the top of the group since the 2003 take-private?

Ardagh watchers say that these guys have comfortably made 150 times their original investment, between debt-funded special dividends over the years and value of their indirect holdings in Ardagh Group, its minority stake in a food cans business, and AMP.

There’s no sign that Coulson, who turns 70 next year, wants to cash in any of his chips. But some of his disciples must surely be keen for a liquidity event. Time to pop the tab?