Private equity owners in line for tidy profits from Berry IPO

Berry Plastics Group Inc.'s initial public offering would deliver more than a 140% unrealized gain to its two private equity owners if it goes as planned.

The Evansville, Ind.-based maker of plastic container, trash bags, bottle caps and disposable tableware said in a filing Wednesday, Sept. 19, that it expects to sell 29.4 million shares to the public at between $16 and $18 each.

It would bank $471 million to $500 million in gross proceeds, which it would use to shrink its $4.5 billion of debt.

The IPO would trim Apollo Global Management LLC's ownership stake to 53.5% from about 74%. Graham Partners' interest would drop from roughly 7% to 5.1%. Neither sponsor would sell any shares.

An IPO priced at the $17-a-share midpoint of the range would endow Berry with a market valuation of $1.9 billion. Its enterprise value, including debt, would be $6.04 billion, or 7.7 times adjusted trailing Ebitda.

Apollo, Graham and Berry's management originally sank $484 million of equity into a $2.3 billion leveraged buyout of Berry in 2006. They kicked in an additional $198 million in 2007 when Berry bought Covalence Specialty Materials.

In June 2007 Apollo and other backers recouped three-fourths of their investment in a debt-funded dividend.

Including that payout, the buyout's original backers would emerge from the IPO with more than a $1.1 billion unrealized profit.

Depending on the percent of equity they put in, Apollo and Graham would ring up a 140% to 195% gain, filings suggest.

Since the LBO Berry has engineered a string of acquisitions, including deals for plastic film producer Pliant Corp., the North American closures unit of Rexam plc, Linpac Packaging Filmco Inc. and plastic container maker Superflo Packaging Inc.

In 2010 it lost out to New Zealand's Reynolds Group Holdings Ltd. in a bid to buy Pactiv Corp., the maker of Hefty trash bags.

Berry posted $784 million in adjusted Ebitda on sales of $4.79 billion in the 12 months ended June 30.

Underwriting banks led by Bank of America Merrill Lynch, Citigroup Global Markets Inc., Barclays Capital and Deutsche Bank Securities Inc. would have a 30-day greenshoe option to buy up to an additional 4.41 million shares from the issuer.

Wachtell, Lipton, Rosen & Katz's Andrew J. Nussbaum is Berry's counsel.

The underwriters tapped Cahill Gordon & Reindel LLP's John A. Tripodoro and William J. Miller for legal advice.