Reuters: Bidders Line Up for $1 Billion Rexam Healthcare Unit – sources

(Reuters) – Beverage can maker Rexam has launched the sale of its healthcare packaging business, which could fetch around 650 million pounds ($1 billion), four banking sources told Reuters.

Rexam said in June it would sell its healthcare business, which makes medical packaging and drug delivery devices such as bronchial inhalers and injection syringes and accounts for about 10 percent of group sales, as it focuses on its main business of making beverage cans.

Teasers have been sent out to prospective buyers, with first round bids likely due by end-September, said one of the sources, who spoke on condition of anonymity. Potential bidders include large private equity firms and strategic players.

A 650 million pound price tag would represent a multiple of around eight times the division’s earnings before interest, tax, depreciation and amortisation (EBITDA), one of the sources said.

Analysts at Credit Suisse estimate the average enterprise value (equity plus debt) to EBITDA multiple for the division’s peer group at 7.6 times, broadly in line with Rexam’s.

In August, Rexam Healthcare reported 23 million pounds of underlying profit before tax on sales of 224 million for the six month period to end-June.

Strategic players such as Germany’s Gerresheimer and U.S.-based Berry Plastics could be interested in the asset, the sources said.

Private equity firms including Cinven, BC Partners, Bain Capital, Carlyle, Permira and One Equity Partners (OEP) could also be interested in the carve out, long starved of so-called ‘primary deals’ which are attractive for the potential restructuring opportunities.

Private equity firms buy companies, try to boost their profitability by cutting costs or shaking up operations, and then sell them on in the hope of making a return.

Two thirds of European private equity activity this year has involved one buyout house selling a company it owns to another, worrying investors that firms are just recycling deals among themselves to trigger fees.

Faced with stiff competition from strategic players though, private equity may struggle to stump up an attractive price, one of the sources said.

Barclays is advising Rexam on the disposal.

On a call with analysts after earnings on Aug 2, CEO Graham Chipchase said the asset was attracting lots of interest but a deal would likely not be completed until early next year due to anti-trust clearances and a likely works council process.

The sale of the healthcare division follows that of its underperforming personal care business in July last year, which makes packaging for cosmetics and toiletries for $709 million in two parts.

Private equity firm Sun Capital Partners agreed to buy the cosmetics, toiletries and household care division for $459 million, while Silgan Holdings acquired its high-barrier food packaging business for $250 million.

Rexam, Barclays, Gerresheimer, BC Partners, Permira, OEP, Bain Capital declined to comment. Berry Plastics, Cinven and Carlyle could not immediately be reached for comment.