Ardagh hopes IPO will sustain rally

Ardagh Group’s bondholders are banking on a leverage-reducing initial public offering of shares to sustain a rally as the European glassware-maker completes a $1.7bn (€1.28bn) debt-funded acquisition in the US.

Ardagh has outperformed its peers in the bond market since the Luxembourg-based company signalled in November it would go ahead with the debut share sale it postponed 15 months earlier. Relative yields on Ardagh’s notes narrowed an average 139 basis points since chairman Paul Coulson said the company was filing for an IPO, compared with the 93 basis-point decline in Bank of America Merrill Lynch’s US High Yield Index.

Ardagh said its purchase of the American business of Cie. de Saint-Gobain’s Verallia unit will make it the US’s largest producer of glass containers. The company, with its roots in an Irish bottle maker started in 1932, and which supplies Coca-Cola, Anheuser-Busch InBev and L’Oreal, has raised about $3.2bn in bond markets in the past two years, according to data compiled by Bloomberg.

Ardagh will hold off on the IPO until the fourth quarter at the earliest until the acquisition is completed, according to a person familiar with the matter, who asked not to be identified because they’re not authorised to discuss it. Company executives told debt investors they’ll use the proceeds of the IPO to lower debt and help fund more purchases, the person said.

Ed Micheau, an external spokesman for Ardagh based in Dublin, declined to comment.

Ardagh’s acquisition spree began after Mr Coulson took over as chairman in 1998. The Verallia deal is its 10th since 1999. Excluding the latest transaction, sales have increased 100 times over the period and seven times since 2007, when Ardagh acquired Rexam Plc’s glass business for €660m.