Morningstar | Valuation intact following departure of CEO Bundey, but risks to Asian acquisition integration increase marginally.
The rationale for Pact’s acquisition in Asia in February 2018 is understandable, given mature organic growth and a lack of M&A opportunities in Australian and New Zealand. In contrast, Asia offers faster economic growth rates off a base of lower average household incomes, which combine with higher population growth rates to offer faster organic growth potential. Still, heightened competition accompanies higher growth rates, with scale players in the region accepting margins yielding returns below the cost of capital. It may therefore be challenging to hang onto the current margins of 9.7% including deal synergies in an environment where rational pricing is not entirely present. Should Asian margins breach 7%, an entirely plausible outcome in our view, we would view the deal as a net negative for shareholders.Pact Group Holdings is provider of specialty packaging and manufacturing solutions in Australasia. Co. converts plastic resin and steel into rigid packaging and other products that service customers in different sectors including: food and beverage, personal care, household consumer, industrial and chemical, and materials handling and infrastructure. Co. also provides a range of services including outsourced manufacturing, filling and packing and a range of sustainability, recycling and environmental services to assist customers in reducing the environmental impact of their product packaging and related processes.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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