Amcor to spin off distribution arm

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

The demerger was announced to the market on Thursday and will mean Amcor Australasia and Packaging Distribution will operate as its own listed company.

The new company will be focused on the supply and distribution of glass bottles, beverage cans and cardboard packaging, primarily in Australia and the US, leaving Amcor to concentrate 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 and an experienced board, is well positioned in its market segments and has a number of exciting growth opportunities."

The move comes as high-profile companies, including Brambles and News Corporation, embark on high-stakes, multibillion-dollar demergers.

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

Investors welcomed the Amcor decision, the shares rose 15¢, or 1.4 per cent, to close 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.

Mr MacKenzie said the business was "well positioned to be sustainable in the Australian manufacturing environment. We're very supportive of the beverage industry in Australia ... It's a solid segment and I don't think it's really exposed to big import competition."

The new business will be headed by the division's 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 details of the demerger would be issued 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 said the announcement "came out of left field" but made sense. "It is always difficult when a corporation has different business divisions competing for their share of available capital."