Apollo Loses Out on Pactiv

NEW YORK (Reuters) – Reynolds Group Holdings Ltd plans to buy Hefty bag maker Pactiv Corp (PTV.N) 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 Tuesday.

The deal, which came despite a rival bid from private equity firm Apollo Global Management (AGMTZ.PK), 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. [ID: nN17254795]

Koch Industries’ [KCHIN.UL] 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 (AA.N) in 2008 for nearly $3 billion.

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.

DEAL DETAILS

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.[ID: nN29113424]

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 (CRP.N), HSBC (HSBA.L) 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 Gunna Dickson)