Berry completes US$6.5bn acquisition of RPC, creating global plastic packaging giant

01 Jul 2019 --- Berry Global Group has completed the acquisition of RPC Group for a purchase price of approximately US$6.5 billion. The combination of Berry and RPC is expected to produce a balanced franchise across geographies, markets and substrates that will help to create a leading global supplier of valued-added protective solutions and one of the world’s largest plastic packaging companies.

Berry today announced a new business structure linked to the company’s acquisition of RPC. Berry’s business structure will now be comprised of four divisions: Consumer Packaging – International; Consumer Packaging – North America; Engineered Materials; and Health, Hygiene, and Specialties. The Company’s previous structure included three divisions: Consumer Packaging, Engineered Materials, and Health, Hygiene, and Specialties.

Berry’s combined global footprint will consist of over 290 locations worldwide, including in North and South America, Europe, Asia, Africa and Australia. The pro forma combined business will employ over 48,000 people across six continents with sales of approximately US$13 billion, based on the latest published financial statements of Berry and RPC. Annual synergies in the combining companies are expected to generate in the region of US$150 million.

“The acquisition of RPC will give Berry the opportunity to leverage our combined know-how in innovative material science, product development and manufacturing technologies to create significant value for our shareholders,” notes Tom Salmon, Chairman and CEO of Berry.

UK packaging expert Neil Farmer, who studied the sale of RPC from its early stages, tells PackagingInsights that Berry’s acquisition of RPC means that it will obtain “a great group of companies” and create a “global plastic packaging player.”

“Berry has a long history of growth through acquisitions. It has a reputation for acquiring and integrating new operations and RPC’s technologies align very well. I suspect the disposal of non-core parts of the RPC business and consolidation of operations could follow. However, RPC is strong in mainland Europe and Berry in North America, so there is a good geographic fit,” Farmer explains.

“Berry is ranked number one for film and sheet in North America and in the top 10 in North America for injection molding and thermoforming. RPC has excellent technologies for its core product categories and technical excellence in areas such as barrier blow molding through Promens Group and compostable coffee capsules through RPC Bebo,” he adds.

RPC cash flow issues invited investors
Farmer notes that it is important to understand the history of this deal, especially because, in his opinion, Berry managed to acquire RPC “quite cheaply.”

Last summer, the RPC share price dived. Farmer believes this was in some part due to rising anti-plastic sentiment, although RPC does not produce any of the single-use items recently banned by the EU. To a greater extent, the dive was as a consequence of investors reacting to a slump in free cash flow, which was less than the expectations of some analysts.

“After this and further negative comment, one of RPC`s top shareholders warned that the company was vulnerable to a takeover bid as different investor views on the appropriate level of leverage were making it difficult for the company to make attractive acquisitions to fuel growth,” Farmer remembers.

“All this was the prelude to the protracted period of negotiations in the autumn with Apollo Global and Bain Capital, which finally led to RPC accepting Apollo’s offer for £3.3 billion (US$4.17 billion) in January 2019, only for Berry to trump Apollo with a £3.34 billion (US$4.22 billion) offer. The Berry offer was not a blockbuster but it was sufficient to beat the Apollo offer. So Berry got RPC and some would say, including me, that it got it quite cheaply,” he notes.

Plastic packaging giants seek global consolidations
Berry’s acquisition of RPC follows the completion of Amcor’s US$6.8 billion acquisition of Bemis last month in what was another huge global consolidation move within the plastic packaging industry. However, Farmer does not believe that Berry has been influenced by the Amcor-Bemis combination in its decision to acquire RPC.

Farmer had actually expected that Amcor might be a potential bidder for RPC, but that did not prove to be the case. He believes that the Amcor-Bemis combination ended that speculation, although Amcor would have continued to follow the progress of the Berry deal in case “anything went wrong.”

“Berry’s ambition to be a truly global player, number two in the world, has been achieved,” says Farmer.

Will Berry continue to grow from here? “Berry started off in the 1980s as a small business and has now grown to a US$13 billion turnover group, so I think the answer is yes,” concludes Farmer.

By Joshua Poole