did you pick it up on the charts or news first ----------------------------------------------------- Europe deal lifts Amcor By Leonie Wood May 11 2002
Amcor shares rocketed 14 per cent yesterday as institutions piled their hopes on the company's ambitious return to large-scale European packaging through a $2.88 billion purchase of Schmalbach-Lubeca.
Not content with Amcor raising $835 million on Thursday, institutions yesterday snapped up stock on the open market at levels up to 19.5 per cent above the $7.40 price offered in a $1.2 billion issue of new shares.
Amcor traded as high as $8.84 and ended the day at $8.76 - $1.08 above the previous close on Tuesday - as about 25.7 million shares changed hands.
The sharemarket's exuberance, judged as irrational by some market participants, underscored the heavy weight of investor expectation now borne by Amcor managing director Russell Jones.
The head of Australian equities at Tower Asset Management, Albert Hung, said that while investors appeared to be endorsing Amcor's acquisition, they were expecting it to enhance company value.
"The market is building a strong expectation in the company that everything will run smoothly," Mr Hung said. "With the share price going up like this, any little disappointment will send it back."
Amcor's astonishing share price rise came at the end of a nightmare week for another Melbourne blue chip, Coles Myer, which lost more than $1.8 billion of value in two days when it pared back overly optimistic profit forecasts.
Market participants yesterday suggested that Amcor - like Coles Myer, Mayne Nickless and Southcorp - would not receive special indulgence if it failed to meet forecast returns and faltered in its efforts to become the world leader in the production of PET (polyethyleneterephtalate) containers.
Amcor on Wednesday revealed it would pay $2.88 billion for German-based Schmalbach, which sells PET containers and closures for bottles and jars to customers in Europe, North America and Latin America.
Amcor has made several ventures into Europe and North America over the past 12 years, registering some notable failures with the Holfelder box business in Germany and the McKinley paper mill in New Mexico. It launched an extensive restructuring in 1997 and, under Mr Jones, has focused on selected packaging sectors where it might garner a leading global market share.
Amcor expects the latest deal will increase earnings per share, even on the expanded capital base, and management expects profit before tax, interest, depreciation and amortisation will represent at least 15 per cent return on funds invested by 2004-05.
Amcor commissioned UBS Warburg and J.B. Were & Son to sell 135 million shares at $7.40 each, a level that sources told Bloomberg was above the initial price range of $6.80 to $7.30.
It also plans to raise up to $365 million from private investors via a one-for-six offer of new shares at $7.40 each. Investors should receive a prospectus in the mail next week.
A further $200 million was raised this week in a new issue of convertible securities that yield 8.5 per cent.
With the institutional share raising completed, Amcor is likely to have a much lighter proportion of private investors on its register, falling from about 45 to 35 per cent.
About one-quarter of the shares are likely to be held by overseas investors
AMC Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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