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Shares slump as Pact joins growing list of float flops

Pact Group Holdings chairman Raphael "Ruffy" Geminder has been forced to defend the timing of his company's initial public offering after the plastic packaging manufacturer became the latest, and largest, disappointing float.
By · 18 Dec 2013
By ·
18 Dec 2013
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Pact Group Holdings chairman Raphael "Ruffy" Geminder has been forced to defend the timing of his company's initial public offering after the plastic packaging manufacturer became the latest, and largest, disappointing float.

Shares in Pact immediately fell below its $3.80 issue price upon debut on Tuesday, opening at $3.50 before rising to $3.60. However, by the end of trading, Pact shares had slumped 13 per cent from the issue price to finish at $3.32.

Another market debutant, property management firm GDI Property Group, fell 12 per cent in its first day of trading.

Pact raised $649 million from investors through the offer of 170.7 million shares at pre-float, with Mr Geminder maintaining a 40 per cent stake in the company.

Mr Geminder said he was "pleased with the support we've received from investors and the market, making Pact the largest IPO of the year" and said it was not "productive to focus on short-term market volatility".

"We are in this business for long-term growth," he said. "This is a practical business full of real infrastructure - we manufacture real things that consumers interact with in their day to day lives. I think that scale and a defensive business model are certainly positives in a volatile world."

The Pact float continues the trend of disappointing ASX debuts in recent weeks, with both Nine Entertainment Co and Dick Smith trading below their issue prices.

After finishing at $1.92 on Tuesday, Nine shares are still well below the $2.35 float price earlier in December, while Dick Smith shares hit a fresh low of $2 before recovering to $2.05. It listed at $2.20 on December 4.

Fund managers on Tuesday expressed concern about Pact's debt levels and IPO pricing. "We thought the debt and pricing was too high and didn't buy stock, and you saw why today," one fund manager said.

Mr Geminder said Pact's debt of about $603 million after the float, which is about three times the 2014 financial year EBITDA forecast of $202 million, should not be a concern to investors.

"As far as the debt levels go ... we are not out of step with our global peers, Mr Geminder told Fairfax Media earlier this week. " This is also a business that spits out a lot of cash flow."

Listing documents released to the ASX on Tuesday revealed few large Australian institutional investors, with AMP a notable exception. Sydney businessman Gary Wolman emerged as a large shareholder with about 6.3 million shares as part of a deal whereby Pact will acquire his Cinqplast Plastop Australia business and a share in a manufacturing plant in the Philippines.

Mr Geminder has explored going public or having a partial sale several times, including an aborted deal with private equity firm KKR & Co in 2012, before this year's renewed appetite for floats led him down the IPO route again.

His wife Fiona Geminder is the daughter of the late Richard Pratt. Mr Geminder's brother-in-law, Anthony, is the executive chairman of the Pratt family cardboard manufacturing and recycling giant Visy.
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Frequently Asked Questions about this Article…

Pact Group Holdings' shares slumped after their IPO because they opened below the issue price of $3.80, starting at $3.50 and ending the day at $3.32, a 13% drop. This decline reflects broader market trends and concerns about the company's debt levels and IPO pricing.

The initial public offering (IPO) price for Pact Group Holdings was set at $3.80 per share.

Similar to Pact Group Holdings, GDI Property Group also experienced a decline on its market debut, with shares falling 12% on the first day of trading.

Fund managers expressed concerns about Pact Group Holdings' high debt levels and IPO pricing, which they felt were too high, leading them to avoid purchasing the stock.

Raphael Geminder, chairman of Pact Group Holdings, is optimistic about the company's long-term growth. He emphasizes the company's practical business model, real infrastructure, and defensive business strategy as positives in a volatile market.

Post-IPO, Pact Group Holdings has a debt of about $603 million, which is approximately three times the 2014 financial year EBITDA forecast of $202 million. Chairman Raphael Geminder believes this level of debt is in line with global peers and is not a concern due to the company's strong cash flow.

Notable investors in Pact Group Holdings include AMP and Sydney businessman Gary Wolman, who became a large shareholder through a deal involving the acquisition of his business, Cinqplast Plastop Australia.

Raphael Geminder is married to Fiona Geminder, the daughter of the late Richard Pratt. His brother-in-law, Anthony Pratt, is the executive chairman of the Pratt family's cardboard manufacturing and recycling giant, Visy.