By Ernest Scheyder
NEW YORK, (Reuters) - Reynolds Group Holdings Ltd
plans to buy Hefty bag maker Pactiv Corp for about $6
billion, further consolidating the competitive food packaging
industry and uniting two iconic brands under one banner.
The privately held aluminum foil maker, controlled by New
Zealand billionaire and former tow-truck driver Graeme Hart,
will pay $33.25 a share in cash, both companies said on
The deal, which came despite a rival bid from private
equity firm Apollo Global Management, is a 7.5
percent premium over Monday's closing price and 38.7 percent
above the stock's value on May 17 when news of Pactiv's intent
to sell itself first surfaced.
Koch Industries' Georgia-Pacific Corp had also
bid, according to a source familiar with Pactiv's efforts.
Given the high level of competition for the Hefty brand, a
final price of at least $34 per share had been expected, Robert
W. Baird & Co analyst Ghansham Panjabi said.
"I'm surprised the transaction price was where it was," he
said. "It seems a little low given the number of bidders that
the media have said were in there."
Reynolds is a subsidiary of New Zealand-based Rank Group
Limited, which itself is owned by Hart.
The deal is the largest ever for Hart, who bought the
Reynolds aluminum business from Alcoa in 2008 for nearly
Hart, who also owns timber and paper businesses and is New
Zealand's richest man with a net worth of about $9 billion, has
a history of large acquisitions through leveraged buyouts.
Pactiv's board unanimously agreed to the offer and the
company plans to hold a shareholder meeting to vote on the deal
"as soon as practicable."
The deal is expected to close, pending filing with the
Securities and Exchange Commission, by the end of the year.
The deal comes less than a month after Pactiv said its
quarterly profit slipped on high raw material costs and guided
for a third-quarter profit below expectations.
Rank Group, which owns Reynolds, will help finance the deal
by taking on about $5 billion in debt. Other financiers include
affiliates of Credit Suisse , HSBC and
Australia New Zealand Bank.
Credit Suisse advised Pactiv, effectively sitting on both
sides of the deal by financing the acquirer as well as
assisting the acquired.
Shares of Lake Forest, Illinois-based Pactiv rose 5.4
percent to $32.58 in afternoon trading on the New York Stock
Exchange. The stock has traded between $21.55 and $32.73 in the
past 52 weeks.
(Reporting by Ernest Scheyder, additional reporting by Matt
Daily, Mike Erman and Megan Davies; Editing by Derek Caney and