Graeme Hart reviews ownership of SIG and Evergreen Packaging

According to reports in the New Zealand and Australian media, less than a decade after building the world's largest packaging empire, Graeme Hart is considering asset sales worth at least $7.9bn to reduce $18bn in debt and to test the waters for an initial public offer of his remaining businesses.

Hart's Reynolds Group Holdings confirmed in a filing to the US Securities and Exchange Commission that it had embarked on a strategic review of its Evergreen Packaging business, which makes juice and milk cartons, its closures businesses, which makes bottle tops and caps, and carton maker SIG Holdings, the second largest drink carton maker after Tetra Pak.

Graeme Hart's Reynolds Group is considering the sale of three units that make up more than a third of the global packaging empire's earnings. Reynolds is reviewing ownership of its Evergreen and Closures businesses and is mulling whether to sell its SIG packaging unit after being approached, it said in a filing to the US Securities and Exchange Commission.

Last month, reports emerged that Reynolds was looking to sell its SIG unit, which makes carton packaging for drinks and liquid foods, for some $5bn. The review of Evergreen and Closures, "is part of a review and possible reallocation of capital and resources within its business portfolio," the company said. "Both reviews may result in a decision to sell some or all of those businesses, although no decision has been made at this time to do so." Reynolds had negative equity of $185m as at 31 March 2014, according to its first-quarter report, with total equity reduced by $1.56bn, "as a result of the group's accounting for the common control acquisitions of the closures segment and Reynolds consumer products business in 2009, and of the Evergreen segment and Reynolds foodservice packaging business in 2010".

Reynolds spent $1.7bn on SIG in 2007, acquiring the equity for the closures segment for $708m from an entity owned by Hart in 2009, according to filings to the SEC. The Evergreen unit was formed from a series purchases from entities owned by Hart for a total purchase price of $1.6bn in 2010. Hart began building the packaging empire in 2006 with the takeover of Carter Holt Harvey, going on to buy International Paper's beverage packing unit and Swiss company SIG the following year, and adding Alcoa's packaging business in 2008. He then ramped up the expansion in 2010, spending $6.5bn on the leveraged buyout of Pactiv and then the $4.5bn acquisition of Graham Packaging in 2011.

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