February 26, 2019 / 5:28 PM / 22 days ago

CVC seeks 800 million euro valuation in AR Packaging IPO: sources

STOCKHOLM/FRANKFURT (Reuters) - Private equity firm CVC is preparing AR Packaging for a listing this year that could value the Swedish cigarette pack maker at 700 million to 800 million euros ($795 million-$909 million), people close to the matter said.

CVC is working with Credit Suisse on options for the maker of packaging for food, tobacco and healthcare products, but may also opt for a refinancing if it fails to attract sufficient investor interest, they added.

CVC explored the market for potential buyers of AR Packaging in 2018, but no deal materialized, they said.

AR’s focus on the tobacco industry, which is grappling with a decline in smoking, had put off some potential suitors and this was also dampening interest in its listing, they added.

In an initial public offering (IPO), CVC would be expected to sell at least 40 percent in the company and seek a valuation at around eight times core earnings, they said.

CVC and Credit Suisse declined to comment.

AR, formed when Ahlstrom and Accent combined their packaging operations in 2011, posted earnings before interest, tax, depreciation and amortization of 85.6 million euros on sales of 601 million euros in 2017. For 2018, it is expected to post core earnings of over 90 million euros.

CVC bought AR in 2016 in a deal that sources at the time valued at just under 450 million euros, meaning an EBITDA multiple of over seven times.

Valuations were already high then as private equity firms were attracted by the stable cash flows generated by packaging companies as more people shop online and as industry players sought to consolidate the fragmented sector.

The packaging market, which Deloitte expects to grow at a compounded annual rate of 5.7 percent to reach $32 billion, continues to attract deals.

British plastic packaging group RPC Group is being targeted by Berry Global and Apollo, while DS Smith closed its 1.9 billion euro purchase of Spanish rival Europac this year.

Switzerland’s SIG Combibloc floated on the stock exchange last year, valuing it at 3.6 billion Swiss francs ($3.6 billion). Its shares have lost in value since.

Editing by Edmund Blair

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