The Amcor (ASX: AMC) share price is in focus after announcing a big merger with Berry Global Group Inc (NYSE: BERY).
Amcor is a large packaging business that is best known for making flexible and rigid packaging for a wide variety of goods.
Amcor to merge with Berry
It has been announced that Amcor intends to buy Berry by offering a fixed exchange ratio of 7.25x Amcor shares for each Berry share.
If this deal is implemented, Amcor will own 63% of the combined business and Berry will own 37% of the combined company.
The boards of directors of both businesses have already unanimously approved the merger.
What’s the attraction of the deal?
Amcor said the combination brings together “two highly complementary businesses” to create a global leader of consumer packaging solutions, offering a broader range of products.
It will be able to “unlock portfolio transformation and deliver significant value to both sets of shareholders.”
The merged business will have combined revenue of $24 billion and adjusted EBITDA of $4.3 billion, including the synergies it expects to be able to extract from the merger. It’s expecting revenue growth to be faster than the market, accelerating by at least 1%.
This combined business is expected to see annual cashflow of more than $3 billion, which will provide funding for organic reinvestment, a “compelling dividend“, possible acquisitions and share repurchases.
Amcor said it has identified $650 million of synergies across costs, growth and financial by the end of the third year. Around $530 million of that relates to cost synergies.
The business is expecting an adjusted cash earnings per share (EPS) boost of more than 35%, with a double-digit return on investment.
Management commentary
Amcor CEO Peter Konieczny said:
This combination delivers on our strategy to accelerate growth by putting the customer first, elevating the role of sustainability and orienting the portfolio toward faster growing, higher margin categories.
We will have a more complete and more sustainable product offering, supported by stronger innovation capabilities, global scale and supply chain flexibility. We will help global and local customers grow faster and operate more efficiently with a team of exceptional talent. As a result, this combination also drives a step change in annual free cash flow, earnings growth and value creation for our shareholders.
I, and the Amcor team, look forward to joining with Berry to accelerate change and real impact for our customers and their consumers.
Final thoughts on the Amcor share price
This is a big deal and would cement Amcor’s place as one of the biggest packaging businesses in the world.
Its scale would enable the company to generate more profit and possibly pay larger dividends, which sounds good to me.
If this deal goes ahead, I’d say Amcor shares would be more appealing than before. But, there are other ASX dividend shares that could also be good picks for dividends and long-term growth.
