Orora Borealis – Amcor Provides Updates On Its Demerger

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Amcor Limited (AMCRY) recently held its Annual General Meeting (AGM) and not surprisingly there was a lot of talk about the planned demerger of its Australasia Packaging and Distribution business, which will be named Orora. In fact, both company Chairman Chris Roberts and Managing Director Ken MacKenzie spent a good chunk of their remarks extolling the virtues of the spin and gushing about the exciting opportunities facing both companies.

According to management, the company currently has two different businesses with non-overlapping end markets. You know what that means…time for a spinoff! Basically, a spin is necessary here in order to sharpen the focus of each company and allow each company to pursue a more tailored strategy. Amcor will be focused on flexibles and rigid plastics, with approximately 2/3 of its sales coming from flexible packaging. Orora will be ‘a regionally focused business manufacturing fibre, metal and glass products as well as having a significant position in packaging distribution.’ According to Mr. MacKenzie, ‘Orora will have solid financial metrics, broadly equivalent to investment grade. It will be demerged with $700 to $750 million of net debt, giving an initial debt to EBITDA leverage of 2.7 times, based on historic earnings.’

The companies will also have new leadership. Graeme Liebelt will become the Chairman of Amcor while Mr. MacKenzie will retain his MD and CEO titles. Amcor’s current chairman, Chris Roberts, will become the Chairman of Orora with Nigel Garrard, AAPD’s current President, joining him as CEO. Mr. Roberts will retire from Amcor’s board and join Orora’s board.

A shareholder meeting regarding the demerger will be held on December 9th and if approved, the spin will become effective on December 17th. Trading of Orora on the ASX would begin the next day with shareholders expected to receive one share of Orora for every Amcor share owned.

Disclosure: Author holds no position in any stock mentioned.

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