ORA has been in a trading halt as the market digests its move to acquire high-end French glass bottle manufacturer Saverglass, a company that can trace its roots back to the 15th century. Apparently, ORA are in “late-stage negotiations” as they look to get a foothold in the premium, super-premium and prestige spirit markets e.g. they produce glass for Grey Goose vodka and Glenfiddich. At this stage, we understand that Citi and Macquarie will be on the ticket to raise $1bn-plus to bankroll the deal. ORA flagged their interest in expanding through acquisitions in North America and Europe earlier in August when it handed down its FY23 numbers, clearly, they weren’t exaggerating!
To put this potential deal into perspective it would see the currently $3bn company increase its annual revenue by ~30% as it looks to align itself with this quality end business which even has its own training facility called the Saverglass School of Glass and Decoration. Private equity has already been knocking on the doors of the French business back in 2006, 2011 and 2016 illustrating the quality of the business, Carlyle who currently has a Euro560mn stake in the company is probably keen on the ORA deal as it provides an exit path after they appeared on the share registry 7 years ago.
- At this stage without specific details we like this foray into Europe by ORA – the stock should recommence trading this morning.
In this month’s report, ORA delivered FY23 EBIT growth of +12% which was ~4% ahead of consensus on better-than-expected margin performance from the North American business while they guided for FY24 earnings growth. Overall we expect glass will continue to drag on local earnings due to weak wine exports into FY24. We remain attracted to ORA as a defensive play and the ongoing margin recovery story in North America, but we note that ongoing volume softness and higher interest costs are likely to weigh on near-term earnings growth making us a buyer of weakness as opposed to a chaser of strength – the cap raise might just present this opportunity – the stock is trading at a 1yr forward P/E of 15x compared to its long term average of 17x placing it the “slightly cheap” corner.
- We continue to like ORA although it’s hard to take definitive price details until we hear further details around the French acquisition.
MM will consider ORA into a weakness
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