Graeme Hart to float part of packaging empire in $2b IPO

Kiwi billionaire Graeme Hart. Photo / Getty Images

Kiwi billionaire Graeme Hart is looking to raise up to US$1.37 billion ($2b) selling part of his packaging empire in an initial public offering.

Reynolds Group Holdings last year said its second-largest division - Reynolds Consumer Products - had confidentially submitted a draft IPO registration to the US Securities Exchange Commission. Today it announced an offer of 47.17 million shares at an expected price of between US$25 and US$28 per share.

"We estimate that the net proceeds to us from this offering will be approximately US$1,190 million, or approximately US$1,369m if the underwriters exercise their option to purchase additional shares of common stock in full, assuming an initial public offering price of US$26.50 per share," it said in the filing.

Hart started building the packaging empire in 2006 in a series of leveraged buy-outs. Group revenue peaked in 2013 at US$13.97b, a year when Reynolds Group's total borrowings were at US$17.94b.

No specific listing date was given, but Reynolds Consumer said it would be "as soon as practicable after the effective date of this registration statement." Reynolds Group intends to list the consumer products unit on Nasdaq.

According to the filing, Reynolds Consumer has a presence in 95 per cent of US households and produces and sells products across three broad categories: cooking, waste and storage, and tableware. Brands include Hefty and Reynolds.

For calendar 2019, Reynolds Group said it expected to report revenue of US$3.02b to US$3.04b, down from US$3.14b in 2018. The decline was largely due to unusually high demand in the fourth quarter of 2018 as customers increased inventory levels, it said.

Prior to the closing of the offer, Packaging Finance Ltd, ultimately owned by Hart, will be Reynolds Consumer's only stockholder.

Once the offer closes, Hart will own and control about 77 per cent of the outstanding shares of common stock, or 73 per cent if underwriters take up an option to buy additional shares in full, Reyolds Group said.

As a result, he will be able to exercise control over all matters requiring approval by stockholders, including the election of directors and approval of significant corporate transactions. That interest may discourage or prevent a change in control of the company that other investors may favour, the filing said.

Reynolds Consumer will take on external debt to settle related-party borrowings, and will use the proceeds to repay debt incurred in a wider reorganisation.

Reynolds Group started selling assets in 2015 when it sold SIG for 3.6 billion euros. In 2017, it sold the Closure Systems International and Graham Packaging businesses in Asia for US$99m. Last year it sold some of its North American, Costa Rican and Japanese units for US$615m.

The asset sales come as Reynolds Group faces a major debt maturity, with US$3.14b due to be repaid in 2020. Analysts questioned management at the June-quarter briefing about whether the company would re-enter the bond market to refinance, to which chief financial officer Allen Hugli said they were still working through their options.