RPC finally receives offer from Apollo

After at least four months of talks, RPC Group has finally received a take-private offer from US private equity group Apollo, valuing the plastics manufacturer at £3.3m.

Apollo's Rome UK bid vehicle has offered 782p per share in cash, with each shareholder also receiving the recently announced 8.1p per share interim dividend.

The offer price represents a premium of 15.6% to the closing price of 683.6p per RPC share on the day before the bid talks were initial confirmed in September, but well short of the £10 at which the shares topped in early 2017.

Negotiations started in the autumn with both Apollo and another private equity group, Bain Capital. Bain dropped out of the bidding in early December but the deadline to make an offer was extended four times.

RPC has in the last year come under increasing pressure from investors over its growth plans and appropriate level of debt. Chairman Jamie Pike said in the summer that "differing investor views on the appropriate level of leverage is constraining the group’s ability to pursue some attractive opportunities for growth".

Pike and the FTSE 250 company's other board members indicated on Wednesday that intend to unanimously recommend that shareholders vote in favour of the offer, which it is intended will be effected by means of a court-sanctioned scheme of arrangement.

"The board believes that the offer recognises the quality of RPC's businesses and the strength of their future prospects," said Pike.

"In July I stated that differing investor views on the appropriate level of gearing was constraining the group's ability to pursue opportunities for growth and, as such, putting pressure on RPC's valuation. I also said that the Board was working to resolve this situation. Today's announcement is the culmination of that process."

RPC shares gained more than 4.5% to 767.6p on Wednesday.

Could this flush out other prospective buyers? JP Morgan Cazenove suggested not: "We are doubtful that other prospective buyers are waiting in the wings. Since Bain withdrew from the process in December, there has been no press speculation as to the presence of any other potential bidders."

Analysts added that they found it "hard to identify likely strategic buyers as many of the peers have elevated financial leverage at this stage of the cycle" and think it "unlikely there are many alternative financial/private equity buyers as the scale of RPC makes it too large for many mid-sized private equity firms".

Any other interest is "unlikely, though clearly not impossible".

Exane analysts said that while some shareholders may view offer as "somewhat underwhelming", they believe it is "better for RPC Group to go private, with possible reluctant support of shareholders, rather than the alternative of possible protracted multi-year public market restructuring".