Hart's Rank Group hires investment banks to run packaging sales

Photo / Norrie Montgomery

New Zealand billionaire Graeme Hart's Rank Group has hired three investment banks to run separate sales of three units in his global packaging empire in what could generate some US$9 billion, according to a media report.

The Financial Times reported on Friday that Rank Group hired Credit Suisse to sell Evergreen and JPMorgan to sell Closure Systems International, two of the three units flagged by holding company Reynolds Group Holdings in June as under review. The FT report, which cites unnamed people familiar with the matter, said the Evergreen sale could fetch as much as US$2.5 billion and Closure could go for more than US$1.5 billion.

Goldman Sachs has already been retained to sell Reynolds' SIG unit, which a Reuters report in June estimated could fetch some US$5 billion.

The sale processes were at an early stage, and there was no guarantee the businesses would be sold, FT reported.

Last month, Reynolds chief executive Tom Degnan scotched a report the asset sales were a precursor to an initial public offering, though he was reluctant to give the reasons behind the review saying it wouldn't be in the company's best interests.

The packaging group reported a profit of US$12 million in the six months ended June 30 on a 1.1 percent fall in sales to US$6.84 billion. Adjusted earnings before interest, tax, depreciation and amortisation fell to US$1.21 billion from US$1.25 billion a year earlier.

Reynolds had total debt of US$18.12 billion as at June 30, according to its second-quarter report published yesterday. That amounts to 6.3 times adjusted earnings, which management has been tasked by Hart to reduce to 5.5 times by the end of the year.

Reynolds spent 1.7 billion euros on SIG in 2007, acquiring the equity for the closures segment for US$708 million from an entity owned by Hart in 2009, according to filings to the SEC. The Evergreen unit was formed from a series purchases from entities owned by Hart for a total purchase price of US$1.6 billion in 2010.

The three units accounted for 38 percent of Reynolds' first-half adjusted earnings. SIG reported adjusted Ebitda of US$250 million on sales of US$1.06 billion in the half, while Evergreen contributed earnings of US$123 million on revenue of US$780 million and Closures had US$91 million of Ebitda on sales of US$572 million.

Hart began building the packaging empire in 2006 with the takeover of Carter Holt Harvey, going on to buy International Paper's beverage packing unit and Swiss company SIG the following year, and adding Alcoa's packaging business in 2008. He then ramped up the expansion in 2010, spending US$6.5 billion on the leveraged buyout of Pactiv and then the US$4.5 billion acquisition of Graham Packaging in 2011.