Given the public backlash recently against plastics and their uncanny ability to end up in our oceans, it might seem strange that RPC (RPC), one of the UK’s biggest producers of plastics packaging, is attracting buyout interest.

The £3.35bn FTSE 250 company has today confirmed weekend newspaper speculation that it is currently in talks which might lead to a takeover of the group. Private equity investors Apollo Global Management and Bain Capital are apparently serious about making an offer for the UK plastics packager.

Unsurprisingly this news has sparked a 20%-plus jump in RPC’s share price, to 823.6p.

RPC makes a wide range of containers, tubs and films for food, household products and DIY materials. Last year to 31 March 20187 it reported £316.6m of pre-tax profit on £3.75bn revenues.

Yet RPC has been in the stock market doghouse for more than a year - its shares have slumped from 991p since early October 2017.

DOGGED BY TWIN ISSUES

As Shares explained in July, a couple of issues have dogged the company and its shares. First, limited organic growth - RPC reported just 2% for the first quarter to 30 June.

Secondly, what looks like a failing roll-up strategy aimed at changing that situation. RPC has splashed millions of pounds on acquistions over recent years and now it faces limits on its ability to do more. Investors see a strained balance sheet.

Net debt last year was £1.139bn or roughly two-times earnings before interest, tax, depreciation and amortisation (EBITDA). Go back to 2010, before its acquisitions splurge, and net debt stood at just £80m. A history of volatile cash flow makes investors uneasy.

Being taken private will likely allow the company to take on far more debt to fuel more acquisitions. Whether that proves to be a good idea remains to be seen.

Apollo and Bain have until 8 October to make a formal offer under UK rules.

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Issue Date: 10 Sep 2018