Although Amcor, which requested the suspension pending “the outcome of late stage negotiations regarding a possible acquisition,” did not provide any further information, its move prompted speculation that Alcan is the target in question.
Reports linking Amcor and Alcan have been circulating for almost a year, with observers suggesting the deal would help both Amcor, expanding its global share of the drug packaging sector from six to 56 per cent, and current Alcan owner Rio which has struggled to sell the packaging group since 2007.
In July Amcor confirmed that it was in talks with Rio in an announcement prompted by the acquisition of Alcan’s US food packaging division by Wisconsin-based plastics company Bemis for $1.2bn (€852m).
The UK’s Financial Times said today’s suspension allows Amcor and Rio to finalise details of the $2bn (€1.5bn) acquisition which, according to the paper, will see the Australian group buy Alcan’s pharma, European food and global tobacco assets.
Analysts from the Royal Bank of Scotland (RBS) were also quick to link Amcor’s trading halt to a move for Alcan, particularly given the Australian group’s need to expand globally.
In a note issued earlier this morning they said that: “Alcan Packaging remains the most obvious solution to Amcor’s growth challenge, given the neat strategic and growth aspects [the acquisition] would bring.”
Potential competition objections?
While most observers predict some sort of announcement later this week, competition worries could still be a stumbling block if concerns raised in July prove to be correct.
Speaking last month shortly after Amcor confirmed that Alcan talks were still on, Merrill Lynch’s Mario Maia said that the 56 per cent share of the global drug packaging market Amcor would gain “may require regulatory approval.”
Andrew Scott at JPMorgan agreed, explaining that: “We expect Amcor would face significant competition hurdles as the combined entity would be a clear number one in most markets.”
A report in today’s edition of The Australian also raises competition worries, reiterating comments made by RBS analyst Richard Johnson.
He said that: "EC intervention could be an issue in some markets, such as the UK, where a joint Amcor and Alcan business would hold a material share of the flexible packaging sector."
Johnson went on to say that: "A similar argument can be made for the tobacco packaging business, given the dominant position that a post-deal Amcor would hold in Europe."