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RPC ends takeover talks with Bain, extends offer deadline for Apollo

Bain has pulled out of the race to buy RPC but talks with Apollo remain ongoing
Short-seller Fraser Perring is also targeting RPC, according to The Sunday Times

RPC Group PLC (LON:RPC) has ended talks to be acquired by US private equity firm Bain and given Apollo Global Management more time to make a firm offer.

The plastic packaging company said the decision to terminate takeover discussions with Bain was mutual, leaving Apollo in the lead to buy the firm. Apollo and Bain had until today to make a firm bid for RPC or walk away under takeover rules.

Bain pulled out of the race but talks with Apollo continue after the Panel on Takeovers and Mergers granted RPC’s request to extend the deadline to make an offer until 5 pm on December 21. It marks the third extension of a deadline.

The news comes after RPC last week reported a 5% drop in first-half pre-tax profit to £154.4mln, blaming higher net finance costs stemming from increased net debt, and LIBOR and margin increases. 

READ: RPC half-year pretax profit falls as polymer prices rise but revenue climbs 7%

Revenue rose 7% to £1.89bln, reflecting continued organic growth of 3.2%, a contribution from acquisitions and pass-through of higher polymer prices that were partially offset by foreign exchange movement.

Short-seller Fraser Perring reportedly targeting RPC

The weekend before last it emerged that short-seller Fraser Perring was also targeting RPC.

The Sunday Times said Fraser Perring, whose research group uncovered financial irregularities at South African retailer Steinhoff, claims RPC has used a string of acquisitions to mask falling earnings, utilising “aggressive accounting” processes to make its end-of-year figures look artificially healthier.

READ: RPC Group shares tick higher after press reports says short-seller Fraser Perring targeting the plastics group

The newspaper said Perring has taken an undisclosed short position in the firm, which is currently being shorted by around 5% of its shareholders, according to the latest data.

Shares fell 3.6% to 690.6p in morning trading.

Peel Hunt maintains 'buy' rating on RPC

Peel Hunt maintained a 'buy' rating and target price of 1,230p on RPC saying: "There will be a perception that a potential bid will come at a lower price than previously might have been the case but then again, the mutually agreed termination of discussions with Bain might be based on not being able to agree a higher enough price."

The broker added: "The narrowing of the potential bidder list to just one will heighten nervousness around the stock with 18 days until December 21."

Peel Hunt expects the share price will fall if there is no bid for RPC but then "something of a bounce as investors recognise the inherent value within the stock". 

While bears will take the view that any failure to do a deal is due to the accounting debate that has been around the company for the past 18 months, Peel Hunt pointed out that deals are not completed for many reasons and the continued presence of Apollo after this period of time suggests that any possible issue is not with the numbers.

-- Adds broker remarks -- 

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