RPC ends talks with one of two private equity groups

3rd Dec 2018 07:13

(Sharecast News) - One of the two US private equity giants in buyout talks with RPC Group has walked away, but negotiations continue with the other.RPC said it has ended discussions with Bain Capital but that the deadline for Apollo Global Management to make an offer has been pushed back to 1700 GMT on 21 December as talks continue.Since first announcing talks about a potential offer in September, the FTSE 250 plastics manufacturer has already twice extended the put-up-or-shut-up deadline with both Bain and Apollo, with this Monday, 3 December being the latest due-date.Last week RPC released interim results showing a 5% fall in pre-tax profits to £154m on revenues up 7% at £1.89bn as there was a delay in passing higher raw plastic prices through to customers.The board has been engaged in talks after facing pressure from investors about the appropriate level of debt that the company should be taking on, which management said was constraining its ability to pursue acquisitive growth. Some investors and analysts have criticised the company's acquisition strategy for obscuring slow underlying growth.RPC's shares fell more than 3% to 693.82p in early trading on Monday morning.The withdrawal of Bain "is likely to be viewed as a small negative for the process due to the reduced competitive tension that this implies, particularly if no other parties come forward and enter the process", said analyst Kevin Fogarty at broker Numis.Panmure Gordon saw it as a large negative, suggesting that dropping down to one potential suitor "materially reduces the competitive tension within the process and will impact on the likely price being offered" and that it is unlikely the UK Takeover Panel will allow another extension."Therefore, we anticipate investors (who seem keen to see a deal) will be lowering their price expectations (especially since there have been several recent instances of private equity walking away from potential deals)."Panmure cut its price target to £10 from £12, with analysts believing "anything higher is unlikely, even in a successful takeout situation".