NZ's Mr Rich eyes up $7.4b trash bag firm

Graeme Hart owns a diverse range of businesses. Photo / Dean Purcell

The country's richest man, Graeme Hart, is tipped to be expanding his empire with his biggest deal yet - a US rubbish bag maker worth up to $7.4 billion.

There is speculation that Hart's private investment company Rank Group is the likely buyer of giant US bag company Pactiv, the maker of Hefty trash bags, according to two well- placed sources.

A deal may be reached as soon as this week, said the sources, who declined to be identified because the discussions are private.

The value of the transaction under discussion couldn't be determined but Pactiv, based in Lake Forest, Illinois, closed at US$30.92 ($43.49) a share in New York Stock Exchange composite trading on Monday, giving it a market value of US$4.11 billion, ($5.78 billion) or US$5.61 billion including net debt.

An acquisition that size would be the biggest deal for Rank Group and Hart, who amassed his estimated $5 billion fortune investing in businesses from wood to dairy and has most recently built a global packaging empire through a series of takeovers.

Hart did not respond to requests for comment.

His purchases over the past decade include US$2.5 billion for Swiss drink-carton maker SIG Holding and US$2.7 billion for Alcoa's packaging business.

He also owns Carter Holt Harvey in New Zealand.

Hart last year combined some of his acquisitions into a new corporate entity, Reynolds Group Holdings Ltd., which had US$3.6 billion in sales in 2009.

The National Business Review's Rich List puts his personal wealth at $5.5 billion.

Pactiv makes items such as takeout-food containers, disposable cookware and garbage cans, pulling in US$3.4 billion in sales last year.

Hart is likely to see strong synergies with his Reynolds Packaging business.

Pactiv Revenue fell 6.2 per cent in 2009 as consumers spent less during the economic decline. While sales have since increased for two straight quarters, Wambold aims to increase support for sales of its Hefty bags in the current period to make up for lost volume in the previous one, he said.

"While others in the industry were struggling, Pactiv had a healthy balance sheet and was able to innovate and redeploy their cash," said Christopher Manuel, an analyst with KeyBanc Capital Markets in Cleveland.

Manuel estimated the company should fetch up to US$35 to US$40 a share as a takeover candidate, valuing it at as much as US$5.3 billion - based on the shares outstanding as of July 31.

Pactiv has been an independent company since it spun off from Tenneco in 1999. It's been in talks with potential buyers for several months, said the sources with knowledge of the negotiations.

Global Management and Koch Industries have also expressed interest in the company and may still be contenders if talks with Rank break down, the sources said.

Apollo, the private equity firm run by Leon Black, already owns the Evansville, Indiana-based Berry Plastics container company.

Apollo was informed in the past day it wasn't the lead bidder for Pactiv, said one of the sources. Apollo was concerned about the size of the equity payment it would have to make for the company, the source said.

- BLOOMBERG, STAFF REPORTER