Amcor Limited

Combined Entity to Bring in Cost Synergies and Stronger Financial Profile: Amcor Limited (ASX: AMC) and, Bemis Company, Inc. (NYSE: BMS) have progressed significantly to close the all-stock transaction which was announced as on 6 August 2018. The company has met the clause of all clearances and consents which were required before the Second Court Hearing in Australia to close the transaction, apart from the antitrust approval in the US. Both the companies have received approvals from their respective shareholders.

On 2^nd May 2019, AMC updated that it has received the approval from its shareholders for the proposed scheme of arrangement between AMC and its shareholders to create a new holding company, Amcor plc (‘New Amcor’).

On 3^rd May 2019, AMC suggested that shareholders of BMS have voted in favour of the Transaction Agreement between the two, giving nod for a combination of the two companies. In a special meeting of Bemis shareholderson 2^nd May 2019 in the US, ~ 76% of shares outstanding voted in favour of the transaction.  As a percentage of the total votes cast, ~ 96% were in favour of the transaction.

In the Scheme Meeting by “Amcor and Bemis combination”, the company communicated that as a matter of transferring Amcor shares to New Amcor, shareholders of Amcor on the register of members on the record date for the Scheme will receive 1 ASX-listed New Amcor CDI, or, if elected, 1 NYSE (New York Stock Exchange)- listed New Amcor share, for each Amcor share held by them. Foreign shareholders who are ineligible, will be provided the cash proceeds from the sale of the New Amcor CDIs (they otherwise entitled).

Bemis released an update on 11 April 2019 stating that the transaction will be effected at a fixed exchange ratio of 5.1 Amcor shares for each Bemis share. After the implementation of the Scheme and completion of the merger with Bemis, shareholders of AMC will hold 71% of New Amcor and shareholders of BMS will end up with 29%.

As per the Scheme Booklet Registered with Australian Securities and Investments Commission on 13^th March 2019, a new holding company, Amcor plc, will acquire all the shares in Amcor and subsequently acquire BMS in an all-stock combination by way of a merger of BMS into a subsidiary of Amcor plc.

Change In The Profile Of Investment Of Shareholders:On the completion of the Transaction, the shareholders of Amcor will hold an interest in the Combined Entity, of which the current Amcor business will only form part with the other part being formed by the business of Bemis.

Financial Rationale Behind the Merger:

1. The management updated that on the completion of the transaction, a realisation of ~ US$180 million in pre-tax annual net cost synergies is expected by the end of the 3^rd year with ~US$65 million and ~US$130 million to be realised by the end of 1^st year and 2^nd year, respectively.Net cost synergies are expected to include ~40% from procurement, 20% from operations and 40% from general, administration and others.  

Estimated pre-tax annual net cost synergies realisation (US$ Mn) (Source: Company Reports)

1. The merged entity is expected to enjoy a stronger financial profile, with combined annual operating cash flows over US$1.2 billion. Profit margins are expected to benefit from the delivery of cost synergies and an investment grade balance sheet with immediate capacity for further investment or share buy-backs.
2. The new entity will be exposed to higher liquidity due to listings on both the NYSE and the ASX. The management expects the new entity to be included in both the US S&P 500 index and the Australian S&P/ASX 200 index.
3. As per the release of Bemis on 11 April 2019, total revenues for the combined entity will stand at $13 billion with EBITDA of $2.2 billion, and annual cash flow after capital expenditure of more than $1 billion.

With the approval received from Amcor Shareholders, these are the important dates, an investor/shareholder should keep in mind:


Important Dates for the Scheme (Source: Company Reports)

On the settlement of the transaction, Amcor will shift its primary listing to the NYSE, and Australian shareholders can make use of CDI (Chess Depositary Interests) trading on the ASX. Amcor’s shares last traded at A$16.260 (down 0.245% on 8 May 2019). 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.