Irish packaging giant Ardagh plans to raise up to €270 million through floating part of the business on the New York Stock Exchange in a move that would value the group at €4.5 billion.
Ardagh told bondholders on Tuesday that the company is borrowing $1.565 billion (€1.39 billion) through a bond issue to refinance short-term debt and return €270 million to shareholders, who include chairman Paul Coulson.
Sources close to bondholders say that the group plans to float 5 per cent of the shares in its operating company on the New York market in the first half of 2017.
It hopes the stock market launch will raise between $250 million and $300 million, or €225 million to €270 million, which would value the overall group at about $5 billion.
Ardagh intends to file applications with the US Securities and Exchange Commission (SEC) to have both the bond issue announced yesterday and its shares listed on the market.
The group earns €7.8 billion a year in revenues making bottles and cans for multinational customers that include Heineken, Coca-Cola, food processor John West and cosmetics manufacturer L'Oreal.
If the flotation goes ahead, Ardagh Packaging Holdings, the ultimate parent, is expected to retain own 95 per cent of the operating business, while investors who buy the stock listed in New York will own 5 per cent.
Dividends
Both the holding company and the listed shares’ owners will receive dividends from the operating company, which will have about €1.4 billion in earnings before interest, tax, depreciation and amortisation, a measure of the cash a company generates.
Ardagh Packaging Holdings will use the dividend to service the €1.39 billion raised from the bond issue announced yesterday, while the group believes that the prospect of regular dividend payments will help attract shareholders to its listed shares.
Part of the cash that the business generates will go towards paying off its €8 billion debt. As Ardagh Packaging Holdings will service the new bond issue, yesterday’s refinancing will leave the operating company with lower liabilities and an initial debt-to-earnings ratio of five times.
‘Attractive terms’
Ardagh plans to exploit the current low-interest rates by replacing expensive short-term debt with cheaper, longer-term, loans. The €1.39 billion that it is raising falls due in 2023 and will have “more attractive terms” than the debt it is replacing, sources said.
The group will use it to redeem €1.21 billion, made up of two payment-in-kind notes that must be repaid in 2019 and on which it is paying more than 8 per cent interest. Ardagh will use the balance to return €270 million to shareholders.
The group bought a number of drinks-can manufacturing businesses from rival Ball-Rexam at the end of June. It now operates 110 factories in 22 countries, employing more than 23,000 people, 60 of whom work in the Republic.
