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Australian packaging company Amcor announced a bid Aug. 6 for Bemis Company, Inc. (NYSE:BMS) in an all-stock deal worth $6.8 billion.
The Analyst
RBC Capital Markets' Arun Viswanathan upgraded Bemis Co. from Underperform to Sector Perform and increased the price target from $44 to $54.
The Thesis
"Complementarity between BMS and Amcor is high and allows for significant ($180 million) synergies", Viswanathan said in the upgrade note. (See his track record here.)
Around 40 percent of synergies in the merger will come from procurement savings, while G&A expenses and operations will account for 40 percent and 20 percent, respectively, the analyst said.
The combined packaging company will have around $13 billion in annual revenue, $2.5 billion EBITDA, free cash flow of more than $1 billion and a market cap of more than $17 billion, Viswanathan said.
RBC expects both parties to approve the acquisition and projects that Bemis will find support until the expected close in the first quarter of 2019. The merger could have broader implications on the packaging industry, as the 11.7x pre-synergy multiple is higher than the sector average of 8.5x and the average of 10x for other deals, the analyst said.
Viswanathan recommends Berry Global Group Inc (NYSE:BERY) and Graphic Packaging Holding Company (NYSE:GPK), which trade at 8.2x 2018 EBITDA and 7.5x 2018 EBITDA, respectively, as buys in the sector.
The Price Action
Bemis shares were down 0.4 percent at $49.30 at the close Wednesday.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.
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