Cantillon: Ruling could slow Ardagh ambitions

Paul Coulson is not used to unexpected setbacks. The man who took Ardagh off the Irish Stock Exchange a decade ago on the view that the market was not valuing its stock fairly, has since turned it into a global glass manufacturing powerhouse.

To most companies, the $1.7 billion acquisition of Saint Gobain’s US glass operations, Verallia, would be a transformational deal. But, though hardly workaday, even for Ardagh, it is the third such deal the company has undertaken in the past six years.

In 2007, the year in which it also made €273 million from the sale – controversial then and since – of the Irish Glass Bottle site in Dublin’s Ringsend, Ardagh doubled its size as a company after paying €660 million for the glass division of Rexam. Three years later, after some minor distractions jousting with Seán Quinn in the UK market, it announced itself on the world stage with the €1.7 billion takeover of Impress, again doubling the size of the business. When it was announced back in January, the Verallia North America transaction looked set to add a further €1.25 billion to group sales. It would also have nicely filled out a couple of gaps in the company’s portfolio – notably the US west coast market and the US wine bottle trade.

But Ardagh is no longer a thrusting smaller operation: it’s a major player in the international market. Even before the Verallia deal, it was the third largest group by sales in the US market (Verallia was second). Together, they would overtake Owens Illinois as the largest supplier of glass bottles in the US. All this barely six months after the $880 million acquisition of the number three player in the US market, Anchor Glass, which gave Ardagh a real presence in that market for the first time. It’s a strong hand and one that has given the US authorities pause for thought.

“Ultimately, this transaction will result in higher prices for consumers,” it said, announcing it would seek court orders to block the deal. Ardagh and Saint Gobain have both signalled their determination to fight those efforts in court. But the ruling could put an unprecedented and untimely brake on Ardagh’s ambitions. The company has signalled its intentions several times in the past year to return to the stock market – this time in the US. Any such move is unlikely while uncertainty hangs over such a major transaction.