Amcor boxes up Australian package arm

Shares in global packaging company Amcor gained ground on news it will spin off its $2.8 billion Australasian distribution business into a separate listed entity.

The demerger of Amcor Australasia Packaging Distribution (AAPD) was announced on Thursday.

It comes as several high-profile companies, including Brambles and News Corporation, embark on high-stakes, multibillion-dollar demergers, designed to boost the value of the parent company.

The new Amcor company will be focused on supply and distribution of glass bottles, beverage cans and cardboard packaging, primarily in Australia and the US, leaving Amcor to focus on flexible and rigid plastics.

Amcor chief executive and managing director Ken MacKenzie said the split would enhance shareholder value by allowing each company to pursue its own growth strategies. "Today, within Amcor, there are two very different packaging companies and the decision to demerge AAPD is the next logical step in the Amcor journey," he said.

"AAPD is well positioned to stand alone as a separate listed company. It has strong management, an experienced board, and is well positioned in its market segments and has a number of exciting growth opportunities."

Last month, pallet supplier Brambles announced it would sever itself from its data management business, Recall. It follows the decision by News Corporation to split off its newspaper and publishing side of the business.

While the Amcor announcement was unexpected, investors welcomed the decision, sending the shares up 15¢, or 1.4 per cent, to close the day at $10.74.

Analysts said the split would have minimal impact on Amcor but warned the new company could face some challenges given its exposure to the struggling local food manufacturing industry.

"The division has borne some of the pain that the general manufacturing sector has experienced as a result of the higher Aussie dollar," CIMB Securities analyst Andrew Scott said. "It has seen some difficult times with the slowdown in the Australian economy."

But Mr MacKenzie said the business was "extremely well positioned" to be sustainable in the Australian manufacturing environment.

The new business will be headed by the division's current president, Nigel Garrard, and chaired by Chris Roberts, who will step down as chairman of the Amcor board.

Amcor is expected to release its full-year results on August 19. Mr MacKenzie said the company would issue further details of the demerger then, and in a separate note to the market in November.

The Australasian packaging distribution arm netted $2.8 billion in sales last financial year, according to Amcor's 2012 annual report.

Morningstar analyst Nathan Zaia agreed the announcement was a logical progression for the company.