AMVIG stake increased
■ Event: Amcor announced its intention to increase its stake in its Asian
folding carton tobacco associate (AMVIG).
■ Transaction details: AMC is to acquire an additional 78.3mn shares in
AMVIG for HK$700mn (HK$8.94/share or ~A$94mn). Amcor’s equity interest
will subsequently increase to 39.3% from 35.4%. The transaction remains
subject to AMVIG shareholder approval (we expect no issues).
■ Strategically, this announcement is positive. It further demonstrates Amcor’s
commitment to AMVIG and its strategy of pursuing low-risk growth capital
expenditure in attractive packaging (tobacco) segments and emerging
markets. AMVIG has a dominant Chinese market position in folding carton
tobacco (largest player 17% market share – post recent WFOE and Blue
Circle acquisitions). It services seven of the top 10 tobacco groups (covering
six of the top 10 cigarette brands). This market leading Chinese position
(China accounts for ~35% of world cigarette consumption) should provide
scale and operational leverage to drive consolidation in the cigarette
packaging market.
■ AMVIG. Based on AMVIG’s HK$8.2bn market capitalisation, AMC’s
investment approximates A$435mn, or ~52cps. For AMC, every A$100mn in
AMVIG valuation change adds ~12cps to our sum-of-the-parts valuation.
■ View. We see this as another small, but positive, move for Amcor as part of
its way forward towards profitable growth in nominated markets. We do not
believe the market is giving AMC any benefit of reinvestment. Our point of
differentiation remains AMC’s balance sheet reinvestment. We assume AMC
are able to redeploy $150mn pa over the next three years (to FY10F) for
profitable growth. Key opportunities include global healthcare markets, North
American custom PET, European Flexible, and Folding carton tobacco in Asia
and Eastern Europe.

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