Graeme moves to buy Graham

Graeme Hart. Photo / Norrie Montgomery.

Graeme Hart's Rank Group has made a takeover offer for US packaging company Graham Packaging, Bloomberg news agency reported yesterday.

Pennsylvania-based Graham, which is controlled by the US private equity giant Blackstone, said it received a US$25-a-share, all-cash bid that topped an offer it accepted from Silgan Holdings in April. Graham shares rose 17 per cent in New York trading on the news.

Rank does not comment to the media on its actions, but investment banking sources said in May that Hart was in the process of selling off his main New Zealand asset, Carter Holt Harvey, to focus on his substantial United States and European assets.

CHH, whose origins date back to the mid to late 1800s, now comprises three core businesses - packaging, pulp and paper, and building supplies.

Hart, New Zealand's richest man, is attempting to further consolidate the packaging industry after acquiring Pactiv Corp, the maker of Hefty trash bags, for US$4.5 billion ($5.5 billion) in November.

He agreed to buy Honeywell International's car-care products unit for US$950 million in January and purchased auto-parts maker UCI International from Carlyle Group in March for US$375 million.

More than US$14.2 billion in packaging-company deals have been announced so far this year, compared with US$2.57 billion in the first half of last year, according to data compiled by Bloomberg.

The latest offer for Graham "could reasonably be expected to lead to a proposal that is superior" to the pending Silgan deal, Graham said in the statement, without naming the bidder.

Graham shares jumped US$3.68 to US$25.63 in New York trading. Silgan fell US$2.53, or 5.9 per cent, to US$40.62 in Nasdaq Stock Market trading.

Silgan agreed on April 13 to pay 0.402 of a share and $4.75 in cash for each Graham share. That's equal to US$21.08 per share, based on Silgan's closing price, or US$1.38 billion.

"The all-cash bid theoretically is superior," Ghansham Panjabi, a Roseland, New Jersey-based analyst at Robert W. Baird & Co said in a report.

Silgan said it had the right to match the new bid for three days if Graham officially declared the offer superior.

Hart, 56, a former tow-truck driver, has amassed a fortune investing in businesses from lumber to dairy.

Hart's wealth was estimated at $5.5 billion last year when he topped National Business Review's annual Rich List, a position he held in eight of the prior nine years.

Silgan could raise the cash portion of its offer to US$10 a share, a US$5.25 increase, and the acquisition would still be accretive by about 45 cents a share, Panjabi said.

Silgan is unlikely to make a "knockout" proposal and its final offer may be about US$26, he said.

- Additional reporting: Bloomberg