IPL Plastics, the Irish-headquartered packaging company, said on Wednesday it agreed to be taken over by US private equity giant Madison Dearborn Partners in a deal that values its stock at a 26 per cent discount to the price at which it floated on the Toronto stock market two years' ago.
The company, once known as One51, and which makes everything from yoghurt pots to wheelie bins, said Madison Dearborn will pay 10 Canadian dollars per share, which values its equity at 555 million Canadian dollars. IPL Plastic’s initial public offering in June 2018 was set at 13.50 Canadian dollars.
Still, the agreed price marks a 153 per cent premium to where the shares were trading before it was reported in the middle of May that IPL Plastics (IPLP) was being circled by potential suitors.
"We have concluded that this transaction is in the best interests of IPLP and fair to our shareholders," said Rose Hynes, a non-executive director and chair of a special committee that assessed the bid.
“With a view to maximizing shareholder value we conducted a thorough assessment of MDP’s proposal, as well as other alternatives reasonably available to the company, including the status quo.”
A deal is subject to approval from at least two-thirds of shareholders and IPL not securing a better offer from another company within 30 to 40 days under a clause – known as a ‘go shop’ provision – attached to the agreement with Madison Dearborn.
Main shareholder
IPL, which continued to include Irish farmers, dairy co-operatives and high-net-worth individuals following its flotation, will see its main shareholder, Caisse de Dépôt et Placement du Québec, roll over 24.9 percentage points of its almost 27 per cent stake into the Madison Dearborn deal. It has decided to accept cash on the same terms as other shareholders for its remaining stock.
IPL has traded at a discount to larger publicly-quoted peers since its IPO for a number of reasons, according to the company, including the business’s financial performance in the past two years.
“The company’s share price underperformance and the company’s limited trading liquidity make it more difficult for the Company to finance and execute on accretive growth opportunities,” it said.
“The special committee and the board believe that this dynamic, which has been made even more challenging given the negative impact of the COVID-19 pandemic and related uncertainties, is likely to continue, rendering the significant and immediate all-cash premium offered by MDP attractive for IPLP’s shareholders.”
