The Orora Ltd (ASX: ORA) share price is booming on Tuesday morning.
At the time of writing, the ASX 200 share is up a sizeable 16% to $2.21.
Why is this ASX 200 share rocketing today?
Investors have been scrambling to buy the packaging company's shares this morning after it received a takeover offer.
According to the release, Orora has received an opportunistic, conditional, and non-binding indicative proposal from Lone Star Fund XII Acquisitions to acquire 100% of its issued shares by way of a scheme of arrangement.
Under the indicative proposal, Orora shareholders would be entitled to receive $2.55 per share, less any dividends declared or payable.
Based on where the ASX 200 share ended yesterday's session, this offer represents a 33.5% premium. However, it also represents a 30% discount to the 52-week high of the Orora share price.
It is likely for this reason that management has labelled the offer as "opportunistic" with its release.
In light of this, it may not come as a surprise to learn that the ASX 200 share has been swift to reject Lone Star's advances.
The company commented:
The Board, together with its advisers, carefully considered the Indicative Proposal and determined that it is not in the best interests of its shareholders to further engage with Lone Star on the basis of the Indicative Proposal, which materially undervalues Orora.
What now?
The ASX 200 share advised that shareholders do not need to take any action in response to the proposal. It intends to keep them updated in accordance with its continuous disclosure obligations if there are further developments.
For now, its focus will be on preparing for the release of its full year results on Wednesday. It notes that it "looks forward to sharing an update on the progress it is making against its strategy."
Should you invest?
Goldman Sachs is a fan of Orora and is likely to be unsurprised by the takeover approach.
It recently reaffirmed its buy rating on the ASX 200 share with a price target of $2.70. This is even higher than Lone Star's takeover offer. It commented:
We believe the legacy business benefits from relative top-line defensiveness, continued self-help in the Americas and growth capital investments that are underway in the Australasian business, while Saverglass is likely to experience near-term volume headwinds, though revert to benefit from the alcohol premiumisation trend, albeit at a slower rate than in the past ~15 years of rapid growth. We are Buy rated on the stock and believe the current market implied valuation of Saverglass provides a favourable risk-reward skew.
