Ardagh Group (Pending:ARD) expects to raise $300 million in its upcoming IPO ($345 million if the underwriters exercise their option to purchase additional shares).

Based in Luxembourg, Ardagh Group is a supplier of rigid packaging solutions, including metal and glass containers for the food and beverage markets.

Ardagh Group will offer 16.2 million shares at an expected price range of $17 to $20. If the underwriters price the IPO at the midpoint of that range, ARD will have a market capitalization of $4.4 billion.

AARD filed for the IPO on November 17, 2016.

Lead Underwriters: Citigroup Global Markets, Deutsche Bank Securities, and Goldman Sachs.

Underwriters: Barclays Capital, Credit Suisse Securities, J&E Davy, J.P. Morgan Securities, and Wells Fargo Securities.

Business Summary: Manufacturer of Packaging Solutions

As described in its SEC Filings, Ardagh Group S.A. manufactures and supplies rigid packaging solutions to over 2,000 clients across over 80 countries, including enterprise-level international companies, large national and regional companies, and small local businesses. Their primary markets are North America, Europe, and Brazil.

The product portfolio includes oval, rectangular, and conical shaped aluminum and steel cans for both single and multi-serve use; steel and aluminum aerosols; glass jars and bottles; kegs; single-serve bowls, and customized products such as coffee cans, peanut cans, rectangular steel boxes, and cigar boxes. The company serves a wide variety of industries: personal care, food and industrial, household, alcoholic and non-alcoholic beverages, seafood, pet food, and pharmaceuticals.

Ardagh Group has 109 production facilities in 22 countries. They have approximately 23,500 employees and a plant network of 74 metal production facilities and 35 glass production facilities. Nearly 95% of its revenue is derived from end-user categories.

Use of Proceeds And Highlights From Management's Analysis

In its SEC F-1 filings, Ardagh Group notes that the main factors influencing operational results are: (i) global economic trends and end-consumer demand for its products, (ii) prices of energy and raw materials and the ability to pass on these costs, (iii) investment in operating cost reductions, (iv) acquisitions, and (v) foreign exchange rate fluctuations and currency translation risks arising from various currency exposures.

In recent financial results, revenue for the year ended December 31, 2016 increased 22% from the year previously to €6,345 million. Its Beverage Can Acquisition increased overall revenue by €695 million compared with the prior year. Ardagh Group also noted that adverse foreign currency translation reduced revenue by €33 million compared with 2015. This was primarily a result of negative movements in the British pound. A reduction in selling prices reduced revenue by €71 million, primarily due to lower beer volumes in Glass North America.

Potential Competition: Anchor Glass, Crown Holdings, Ball Corporation, and Others

Ardagh Group faces competition in both the metal and glass packaging categories. These companies include Anchor Glass, Owens-Illinois (NYSE:OI), Verallia, Vidrala, Silgan Holdings (Nasdaq:SLGN), Crown Holdings (NYSE:CCK), and Ball Corporation (NYSE:BLL).

If Ardagh prices at the midpoint of its proposed range, it will have a P/S ratio of 0.65. This is in line with peers OI, SLGN, CCK, and BLL, and below the industry average of 1.1.

Executive Management Highlights

CEO Ian Curley joined Ardagh Group in June 2016 and became Group Chief Executive Officer in September 2016. Prior to joining the company, Mr. Curley was Group Chief Financial Officer of Smurfit Kappa Group. He is a Fellow of the Institute of Chartered Management Accountants (Ireland).

CFO David Matthews assumed his position in March 2014, and he was appointed to the Board of Directors in May 2014. His previous experience includes senior financial positions at DS Smith plc and Bunzl plc. Mr. Matthews qualified as a Chartered Accountant in 1989 with Price Waterhouse in London and holds an Engineering degree from the University of Southampton.

Conclusion: Consider Buying In

We are impressed with significant top line growth and bottom line improvement in the past year, as well as a very strong underwriting team.

At its expected valuation, Ardagh will be priced competitively with its peer group.

We believe this large deal could be popular, being the first this week ahead of the highly anticipated tech deal MuleSoft and suggest investors consider buying in.