Synthetic value

23 January 2019 By Liam Proud Follow @liamwardproud

The buyout group is getting RPC on the cheap. That’s partly because investors were spooked by the packaging-maker’s alleged misleading financials, which Apollo has had a chance to scrutinise through due diligence. Call it an informational arbitrage – at public markets’ expense.

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Private equity group Apollo Global Management on Jan. 23 agreed to buy RPC Group for 7.82 pounds per share in cash, valuing the plastic-packaging maker’s equity at just over 3.3 billion pounds.

The companies claimed that the bid represented a 25 percent premium to RPC’s “adjusted unaffected” price before the start of the offer period. That calculation was based on the target’s Sept. 7 share price, an interim dividend, and was adjusted for a 7.6 percent decline in the FTSE 250 index during the offer period.

Explaining its reasons for accepting the bid, RPC said it was “mindful of the risks to the business posed by the current political and macro-economic environment”. The statement also said shareholders’ differing views on leverage constrained RPC’s growth. Apollo said part of its strategy was to continue building RPC through acquisitions in Europe and North America.

RPC shares were up 4.6 percent to 7.68 pounds at 0930 GMT on Jan. 23.

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