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Acquisition Created Shareholder Value- Case of AMCOR acquires ALCAN packaging from Rio Tinto

Table of Contents

Research Aims and Objectives3

Review of Relevant Literature3

Data Sources5

Research Design and Statistical Analysis5



Acquisition Created Shareholder Value- Case of AMCOR acquires ALCAN packaging from Rio Tinto

Research Aims and Objectives

To explore the concept of Shareholder Value with the help of Acquisition.

To examine the effects on company's performance after acquisition.

To discuss the case based on the ALCAN packaging from Rio Tinto by AMCOR.

To illustrate the operational performance of AMCOR after the acquisition.

To elaborate the creation of AMCOR shareholder's value after the acquisition.

Review of Relevant Literature

On 18 August 2009, Amcor announced the acquisition of the Alcan Packaging businesses and following regulatory approvals the acquisition completed on 2 February, 2010(Johnson, 2011: 89-93). The purchase price of US$1.948 billion represented a profit before interest, tax, depreciation and amortisation (PBITDA) multiple of 5.1 times calendar year 2009 earnings. This was an excellent outcome and reflects a bottom of the cycle multiple applied to bottom of the cycle earnings. The Company acquired 80 plants in 28 countries and increased sales by approximately 50%(Jensen, 2010: 45-61).

The acquisition was conservatively funded with approximately two thirds equity and one third debt and as a result of this funding mix the balance sheet was strengthened.

From a strategic perspective, the businesses acquired are strongly aligned with nominated strategic growth segments, and comprise:

Food packaging Europe

Global Pharmaceuticals packaging

Food packaging Asia

Global Tobacco packaging.

The addition of these businesses provides the ability to substantially improve the value proposition for customers by leveraging a broader geographic footprint and enhanced scale (Haspeslagh, 2010: 121-125).

The foundation of a successful integration process is aligning the organisation. An exciting vision, consistent values, clear goals and detailed implementation plans are critical to creating a unifying culture. Building on this foundation is achieving cost synergies, enhancing customer value and improving underlying operating performance.

Within Amcor, behaviour and values are defined by The Amcor Way. This is an operating model that sets out the core competencies and values that are the foundations for success. The core competencies are Safety, Customer and market focus, Low cost, Capital discipline and Talent management. The values are Safety, Integrity, Teamwork, Social responsibility and Innovation. (Jackson, 2011: 77-85)

The primary integration task was to ensure that all new co-workers were given a clear understanding of the Amcor culture and operating model. An extensive on-boarding program was undertaken immediately post closing and it is pleasing to report that the new co-workers enthusiastically embraced The Amcor Way (Jackson, 2011: 77-85).

The key benefit of creating a common culture has been the speed at which teamwork and cooperation across the new organisation has developed, especially a focus on value creating integration opportunities.

The performance of the former Alcan Packaging businesses since acquisition has been good. Earnings were moderately higher than the first half of the year and substantially higher than for the same period last year.

This improvement is predominantly due to full period benefits of cost reduction programs, as well as increased demand, especially when compared to the January to June 2009 period(Johnson, 2009: ...
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