ASX 200 stock Orora announces $2.2 billion acquisition and mega cap raise

Orora expects the acquisition to be EPS accretive in the first full financial year of ownership.

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ASX 200 stock Orora Ltd (ASX: ORA) remains suspended for now amid news of a mega capital raising.

Orora, a global packaging manufacturer and distributor, has announced the acquisition of premium global bottle maker Saverglass SAS for $2.156 billion.

It will buy 100% of Saverglass by purchasing all shares of the unlisted company Olympe SAS.

Saverglass designs and manufactures high-end bottles with unique integrated decoration capabilities for the premium and ultra-premium spirit and wine markets.

Orora will buy Olympe for an enterprise value of 1.29 billion euros (A$2.156 billion).

The enterprise value represents an implied multiple of 7.7 times adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of Saverglass for the 12 months to 30 June.

The ASX 200 stock went into a trading halt and then an extended suspension last week while the deal was being finalised.

Orora stock should re-commence trading soon.

Meantime, let's look into the details of the capital raising.

ASX 200 stock Orora announces $1.34 billion cap raise

Orora will fund the acquisition via a fully underwritten equity raising of approximately $1.345 billion, plus $875 million of acquisition debt financing.

The capital raising will comprise a $450 million institutional placement and an $895 million 1-for-2.55 accelerated non-renounceable pro rata entitlement offer.

In a statement, Orora said Saverglass is a high-quality business that will enhance its "strategic advantage, scale, diversification and … future growth opportunities".

Orora projects the acquisition will be mid-single-digit earnings per share (EPS) accretive (including full run-rate synergies) in the first full financial year of ownership.

What will Saverglass do for Orora?

Orora said Saverglass will become the centrepiece of its global glass business unit.

It will operate as a third platform for growth, with Saverglass' management team remaining in place.

Orora said the acquisition funding will result in leverage of 2.5 pro forma FY23 underlying EBITDA within Orora's stated range.

On a pro forma basis, the acquisition represents an approximate 69% increase in Orora's underlying FY23 EBITDA to approximately $749 million (excluding any pro forma synergies).

This means a 320-basis-point uplift for Orora's underlying EBITDA margin.

Orora also expects the deal to facilitate "strong cash flow to support future deleveraging".

What did the companies say?

Orora CEO Brian Lowe said:

This strategic acquisition further strengthens our existing glass business, establishing Orora as a global player of scale in attractive premium segments.

Saverglass CEO Jean-Marc Arrambourg said:

We are extremely excited to join Orora as we look to consolidate and accelerate Saverglass' strong momentum.

We see Orora as a natural owner of Saverglass, given the high complementarity of the two businesses and significant benefits to be realised from the combined global network and capabilities.

Investors in this ASX 200 stock can read Orora's investor presentation regarding the cap raise here.

Orora stock price history

The Orora share price is currently frozen at $3.52.

Orora stock is up 24% in the year to date and up 9.6% over the past 12 months.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Orora. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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