Private equity firm Apollo Management is in discussions to buy Pactiv, the maker of Hefty food storage and garbage bags, a source familiar with the situation said Monday.
Pactiv shares jumped 20.2 percent to $28.82, valuing the company at about $3.8 billion.
Shares of rivals also rose, with packaging company Bemis up 3.6 percent and Glad rubbish bag maker Clorox up 1.1 percent.
The talks between Pactiv and Apollo are further evidence of a resurgence in leveraged buyouts as the economy improves and the availability of financing increases.
LBOs have been increasing in size — earlier in May buyout firms Silver Lake and Warburg Pincus agreed to a $3.4 billion takeover of financial data provider Interactive Data.
Talks are also ongoing between a consortium of private equity firms to buy Fidelity National Information Services in a potential deal that could reach around $15 billion, sources have told Reuters.
There has also been a pickup in deals among packaging companies. Last year, Bemis agreed to buy part of global miner Rio Tinto's food packaging business for $1.2 billion.
News of Apollo's talks was earlier reported by the Wall Street Journal which said any deal was a few weeks away and faced several hurdles.
Apollo and Pactiv declined to comment.
A deal would make sense for Apollo, which has a similar investment in plastics firm Berry Plastics, Robert Baird analyst Ghansham Panjabi said.
He said Apollo could integrate the two companies and eventually take the combined entity public.
"The Hefty brand is pretty powerful," said Panjabi. He thinks a deal could value Pactiv about $34 a share.
The combination of Berry and Pactiv would create the biggest U.S. plastic packager, which would be set up for a push into overseas markets, he said.
Berry has annual sales of about $4 billion, while Pactiv generates about $3.5 billion.
Pactiv, which competes with Clorox's Glad and generic packaging brands, reported long-term debt of $1.43 billion as of March 31, a 12.6 percent increase from a year earlier.
In April, Pactiv said its first-quarter profit fell 38 percent due to sluggish demand and high raw material costs, and the company also trimmed its full-year forecast.
Demand for Pactiv's products waned during the recession as consumers ate out less often, but there has been some improvement in recent months.
"One thing that has surprised us is how slow consolidation has been in plastic packaging," said Panjabi. "We've seen it on the metal side, we've seen it in glass. We've not seen it until now in plastics."
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