Australia gets new $3bn packaging giant

A $3 billion packaging giant has been created after Amcor decided to split its company in two.

Amcor announced this morning that it would demerge its Australasia & Packaging Distribution (AAPD) division in mid-December, subject to shareholder and regulatory approval.

AAPD generated $2.9 billion of sales in the 2011-12 financial year, which represented 24% of Amcor's $12.2 billion turnover.

AAPD earned $1.5 billion in the first half of 2012-13, or 25% of Amcor's $6 billion turnover. The division's full-year earnings are forecast to be in line with the previous financial year.

Amcor said the demerger would "enhance shareholder value" by allowing each company to focus on its "own growth agendas and strategic priorities".

The two companies have very different markets, said chief executive Ken MacKenzie.

"Amcor has global leadership positions in the flexibles and rigid plastics segments, while AAPD operates in the fibre, glass and beverage can packaging markets in Australasia and packaging distribution in North America and Australia," he said.

[Related: Amcor announces global restructure]

MacKenzie said Amcor had invested more than $1 billion in AAPD in the past six years to "improve its manufacturing capabilities and ensure it is well positioned for growth".

Those investments included the new $500 million recycled paper mill at Botany, a new furnace at the Gawler glass bottle plant and a new beverage can line in New Zealand.

"AAPD will continue to benefit from these initiatives in terms of earnings and cash flow," he added.

The new company will be listed on the Australian Securities Exchange. It has yet to be named, but it will be led by current Amcor executives.

Current Amcor non-executive chairman Chris Roberts will be chairman; AAPD president Nigel Garrard will be chief executive; and non-executive directors John Pizzey and Jeremy Sutcliffe will join the board.

Amcor will retain MacKenzie as chief executive and managing director, while current non-executive director Graeme Liebelt will become chairman.

Roberts and Pizzey will retire from the Amcor board and Sutcliffe will serve on both companies' boards.

Shareholders will vote on the demerger plan at an extraordinary general meeting in early December. The separation would then be made official at a court hearing in mid-December.

[Related: More finance news]

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