ASX All Ords stock Pact Group jumps 8% on takeover news

A takeover is looming but shareholders may be underwhelmed.

| More on:
a man in a business suite throws his arms open wide above his head and raises his face with his mouth open in celebration in front of a background of an illuminated board tracking stock market movements.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Pact response

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.

Motley Fool contributor James Mickleboro 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

Miner and company person analysing results of a mining company.
Mergers & Acquisitions

Evolution Mining shares frozen amid $717 million acquisition

Evolution is snapping up this copper-gold asset to bring more cash through its doors.

Read more »

A concerned man looking at his laptop.
Energy Shares

Origin share price continues to fall after shareholders reject Brookfield takeover

Origin's takeover has officially collapsed. What happened?

Read more »

A man stands with his arms crossed in an X shape.
Mergers & Acquisitions

Origin shares on watch after takeover collapses

Shareholders have voted against this energy giant's takeover.

Read more »

A woman sits with a glass of milk in front of her as she puts a finger to the side of her face as though in thought while her eyes look to the side as though she is contemplating something.
Mergers & Acquisitions

Coles share price falls despite ACCC acquisition approval

Coles' $105 million dairy acquisition has been approved by the ACCC.

Read more »

Worker inspecting oil and gas pipeline.
Mergers & Acquisitions

Origin Energy share price tumbles on 'incomplete complex' revised takeover offer

Origin Energy shareholders will get to cast their votes on the contentious takeover proposal on Monday.

Read more »

Two CEOs shaking hands on a deal.
Mergers & Acquisitions

Wesfarmers share price rises amid latest acquisition news

The company has completed its latest acquisition.

Read more »

Close-up of a smiling man holding a jar containing nuggets of gold.

Guess which little-known explorer this ASX 200 gold stock is buying up

The junior ASX gold explorer has a promising pre-development project in Tanzania.

Read more »

A girl wearing a homemade rocket launches through the stars.
Small Cap Shares

Guess which ASX small-cap share is rocketing 24% after rejecting a takeover offer

This online beauty retailer is in the sights of a UK rival.

Read more »