Billionaire’s buyout offer for Pact labelled too cheap

The independent directors of ailing packaging group Pact Group have told shareholders to reject a takeover bid by Rich Lister Raphael Geminder, who already owns just over 50 per cent of the company.

An independent board committee, led by director Michael Wachtel, has told the remaining shareholders to reject the 68¢ a share offer made by Mr Geminder in mid-September because independent expert Kroll Australia had valued the shares at between $1.06 and $1.51.

The independent committee unanimously recommended that Pact shareholders reject the offer from Mr Geminder’s Kin Group because it is “neither fair nor reasonable”.


Mr Wachtel said the offer by Mr Geminder was “opportunistic”.

“Kin Group is attempting to increase its level of control over Pact without paying a customary premium,” a letter from Mr Wachtel accompanying the official target’s statement said on Friday. Pact shares were trading at 72¢; Mr Geminder pitched his offer at 68¢ a share, a small premium to the 67.5¢ a share at which Pact closed the day before the offer was made.

Mr Wachtel, who is also a director of the Future Fund, has been on the board of Pact since early 2020.

The independent expert report from Kroll Australia said the valuation range of $1.06 to $1.51 included a premium for control. A valuation range of 83¢ to $1.24 per share was outlined for the minority stake when a control premium was excluded.

Mr Geminder made his fortune in packaging, and wants to take Pact off the ASX in a deal that values the company at just $234 million.

The manufacturer of plastic bottles, vitamin and beverage containers had a sharemarket capitalisation of $1.6 billion just two years ago. But its profits were crunched by surging inflation in raw materials, and the heavy investment in modernising its plants to deliver greener products that are more recyclable.

Progress on transformation

The performance of Pact has been a drag on Mr Geminder’s wealth, which is estimated at $1.3 billion in the latest Financial Review Rich List. Pact has been listed on the ASX since 2013, when it raised $649 million in fresh capital at $3.80 a share.

Mr Geminder’s Kin Group has investments across retail, packaging and property, and other listed companies including a 20 per cent stake in discount retailer The Reject Shop, 66 per cent of Pro-Pac Packaging, and a 4.5 per cent stake in skincare and make-up distributor McPhersons. Pact’s origins date back to 2002 after Mr Geminder engineered the management buyout of several underperforming assets from the billionaire Pratt family’s Visy Industries.

Mr Wachtel’s letter to shareholders also outlined that Pact, under chief executive Sanjay Dayal, was making headway on its transformation strategy, with $20 million of cost savings and a divestment to cut debt by $160 million.

“The offer does not reflect the potential benefit of these initiatives,” the letter said.

Pact in August agreed to the $160 million sale of 50 per cent of one of its growth businesses, Crate Pooling and Crate Manufacturing, to infrastructure investor Morrison & Co.


Source: AFR