Bemis generates EBITDA and EBIT of about US$590m pa and US$420m pa, respectively (which are approximately half that of AMC's EBITDA and EBIT).
Bemis currently has an EV of US$6.3bn (US$4.7bn market cap and US$1.6bn in Net Borrowings).
Assuming AMC has to pay a 15% to 20% control premium for Bemis, it implies an acquisition market cap of US$5.6bn, i.e., an EV of US$7.2bn.
On my maths, that equates to acquisition multiples in excess of 12.0x (EV/EBITDA) and 17x (EV/EBIT).
While it is quite self evident how such a course of action - if it is indeed the one that is chosen by the AMCOR board - will result in significant short-term value accruing to Bemis shareholders, I am highly sceptical how it can can possibly create any value whatsoever for AMC shareholders.
Accordingly, if the media reports concerning AMC acquiring Bemis have any truth about them, I suspect I will be selling my AMC shares over coming days.
AMC Price at posting:
$15.28 Sentiment: Hold Disclosure: Held
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