KEY POINTS:
Graeme Hart's Rank Group has done one of the biggest deals by a New Zealand company with the $3.5 billion purchase of American company Alcoa's packaging and consumer business.
The pre-Christmas deal eclipses Hart's biggest purchases to date - the $3.3 billion each for acquiring Carter Holt Harvey and Swiss packaging SIG.
Alcoa's packaging division employs 10,000 workers, mainly in the United States but includes Europe, South America and Australia.
The privately held Rank Group has a significant global packaging empire, including Carter Holt Harvey, SIG Holding, and Evergreen Packaging, with operations in North America, Australasia, Europe, Asia, South America and the Middle East and employs approximately 17,000 people.
Before the latest purchase, Rank Group was the world's second biggest operator in the paper products field.
Alcoa is one of the world's biggest aluminium producers for the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets. Earlier this year, it said it was looking to dispose of its packaging business.
Under the US$2.7 billion deal, Hart will pay cash for a range of products, many of which are household names in the United States where the packaging industry is worth an estimated US$90 billion.
Businesses included in the sale are plastic and aluminium packaging closures and capping equipment for beverage, food and personal care customers; Reynolds Wrap branded and private label foil, wraps and bags flexible packaging pharmaceutical, food and beverage, tobacco and industrial markets.
Alcoa's packaging and consumer businesses generated approximately US$3.2 billion in revenues and US$95 million in after-tax operating income in 2006, representing approximately 10 per cent of Alcoa 2006 turnover and about 3 per cent of after-tax operating income.
The determinedly private Hart, who started his working life with jobs as a tow-truck driver and panel beater, is New Zealand's richest man, with a fortune estimated at $2.75 billion.
"He's certainly building quite a packaging empire," said Stephen Walker, principal of Walker Capital Management.
"This extends the scope of the business and will give him some economies of scale. He likes stable cash flow, which is why packaging appeals."
"I guess the environment was right. His bankers obviously have a lot of faith in him."
And another big deal in Australia remains the subject of speculation.
Hart is reportedly in talks with Amcor about forming a partnership between Carter Holt Harvey's cardboard packaging company and the Australian packaging heavyweight.
The joint venture, between the corrugated and paper businesses of Carter Holt Harvey and Amcor, would generate annual revenue of about A$1 billion ($1.15 billion).
Hart bought out the remains of Burns Philp in August last year, unlocking $2.9 billion in cash reserves, sold $1.5 billion of Carter Holt forests and in July $300 million more of Carter Holt property.
While private equity has been feeling the crunch, Hart has got cash flow and the Alcoa transaction is expected to be completed by the end of the first quarter next year.
Alcoa's packaging unit has been hit with higher costs as demand and prices for aluminium have risen, stoked by emerging economies' spending more on construction.
"Alcoa is better off without packaging; this is a low-margin business," said Charles Bradford, an analyst at Soleil Securities in New York.
"The best returns are in the upstream."
The price of aluminium has risen 73 per cent since 2002 because of rising demand as China boosts investments in its infrastructure. Global use of the metal will rise 10 per cent this year, the fastest rate of increase since 1980.
Alcoa failed in a hostile attempt to buy Montreal-based Alcan in July to head off growing competition from emerging market producers such as United Company Rusal, the Russian company that is the world's second-largest aluminium producer, after Rio Tinto agreed to buy Alcan for $38.1 billion in July.
Some analysts have speculated that Alcoa will be more attractive to potential acquirers as it sells less profitable businesses that aren't related to aluminium production.
Hart, 52, left school at 16, and had a number of jobs before branching into business, primarily buying and turning around underperforming companies.
He likes to stay out of the public limelight, but has talked of a lack of interest in making money for its own sake, and described his wealth as a "byproduct" of what he does.
- ADDITIONAL REPORTING: AGENCIES
