The Pact Group Holdings Ltd (ASX: PGH) share price is charging higher on Wednesday
In morning trade, the ASX All Ords packaging stock is up 8% to 73 cents.
What's going on with this ASX All Ords stock?
This morning, Pact Group revealed that it has received a takeover approach.
However, unlike most takeover offers that are a meaningful premium to the prevailing share price, this offer is broadly in line with where the ASX All Ords stock was already trading.
According to the release, major shareholder Kin Group intends to make an unconditional 68 cents cash per share off-market takeover offer for all the shares in Pact Group that it does not already own.
Kin Group is a diversified, global, long-term-focused investor ultimately controlled by the Geminder family.
Why would you accept this offer?
Kin Group notes that the offer provides shareholders with liquidity and certainty of an unconditional, all-cash offer at a price fractionally above yesterday's close price of 67.5 cents. It also notes that it allows shareholders to avoid any further risk associated with their investment.
In addition, the suitor highlights that it has a controlling interest of over 50% in Pact Group. As a result, it feels the prospect of a competing offer eventuating is highly unlikely. Though judging by the Pact Group share price jump today, some investors may not believe that is the case.
And despite evidently being very keen to acquire the ASX All Ords stock, Kin Group has been talking down the company, its prospects, and investment opportunities. It named five reasons why it thinks shareholders should accept its offer. Two of these are:
Pact faces a challenging environment, with supply chain disruptions, inflationary pressures, fluctuating resin prices, labour constraints and macroeconomic uncertainty.
Pact is now a smaller business with a reduced earnings base. Notwithstanding the sale of 50% of Pact's Crate Pooling Business, Pact will likely continue to have high debt in light of its ongoing capital expenditure plan. Accordingly, there is uncertainty about the prospect of future dividends in the short to medium term.
The ASX All Ords stock is down more than 50% over the last 12 months.
The Pact board of directors advised that it is not yet in a position to make a formal recommendation to shareholders. As a result, it has advised shareholders to take no action at this stage.