Here’s why Orora (ASX:ORA) shares plunged by more than 20% this morning.

Nick Sundich, September 6, 2023

Orora (ASX:ORA), a global packaging manufacturer, distributor is undertaking one of the biggest capital raisings by an ASX company in almost a year. But shares fell this morning given the capital was raised at a discount.

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Orora (ASX:ORA) is undertaking a major acquisition

Orora is buying Saverglass, a premium bottlemaker that is based in France. The deal is costing just over $2bn with $875m coming from debt, $450m from an institutional placement and the remaining $895m coming from a rights issue.

The capital raising is priced at $2.70 per share, a discount of over 20% to its last close – hence the reason why shares fell this morning.

Is it a good deal?

It certainly is for the equity capital markets, which have weak for the past couple of years. But for Orora, it remains to be seen.

We’ve said before that it is always a bad sign at IPOs when private equity is selling and it could be here too. Orora is buying from the Carlyle Group that has held it since 2016. Perhaps if Carlyle thought there was more value to be created, it would have held on.

Ultimately, only time will tell. But we think shares have dropped predominantly because the deal was done at a discount and not necessarily because shareholders thought it was a bad deal.

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