Japanese company Nippon Paper Group has signed an agreement with Orora to acquire its paperboard fibre-based packaging business in Australia and New Zealand.
The agreement involves Nippon Paper’s consolidated subsidiary Paper Australia (AP). The total enterprise value is A$1.72bn ($1.161bn).
The acquisition deal covers the B9 Paper Mill, fibre converting, speciality packaging, cartons, bags, functional coatings and Orora WRS packaging distribution operations.
In a statement, Nippon Paper said: “Through the acquisition of the business, Nippon Paper Group will be entering the integrated corrugated paperboard manufacturing business in the Oceania region.
“Nippon Paper seeks not only to augment the synergistic effects with AP but also plans to further build the group’s packaging business on a global scale.”
Currently subject to final approval from the relevant authorities and other closing conditions, the transaction is expected to be finalised during the fiscal year, ending on March 2020.
Nippon Paper will fund the transaction through a bridge loan from Mizuho Bank, which will be re-financed by loans from financial institutions.
Orora operates the business through a comprehensive model that involves a wastepaper collecting system with corrugated base paper manufacturing and automated cardboard production in Australia and New Zealand.
The company was part of the packaging company Amcor and is a customer of AP.
Orora worked with AP for the supply of kraft liner board, as well as bag and sack papers.
Purchase of Orora Limited’s Paperboard Fiber Based, Packaging Business in Australia/New Zealand
Nippon Paper Group has announced an agreement with Orora Limited (“Orora”), a listed company of the Australian Securities Exchange, to purchase (“Transaction”) its paperboard fiber based, packaging business in Australia and New Zealand (“Business”). The signing of the contract was resolved at the Board of Director’s meeting held today on October 10, 2019.
The final structure for purchasing the Business which involves Nippon Paper’s consolidated subsidiary Paper Australia Pty Limited (“AP”, headquartered in Melbourne, Australia) will be confirmed in due course. The purchase of the business is subject to final approval from the relevant authorities and other closing conditions, and is expected to be completed during the fiscal year ending March 2020. 1.
Nippon Paper Group is promoting packaging, household paper products/health care, chemicals, energy and logs & lumber business as five key growth areas. Supported by recent trends recognizing the environmentally-friendly nature of paper as a renewable material, Nippon Paper has been exploring opportunities to expand its value chain from base paper to processing as well as to expand business in Japan and abroad through capital investment and M&As.
Orora has established strong operations in Australia and New Zealand through a comprehensive business model combining a wastepaper collecting system with cutting-edge corrugated base paper manufacturing, highly automated cardboard production and the provision of packaging-related materials and associated services. The company split from world-leading packaging company, Amcor Plc. in 2013, and is a customer of Nippon Paper Group’s subsidiary AP which was acquired in 2009 after. The two companies have a long-standing successful business relationship based on the supply of kraft linerboard and bag and sack papers.
Through the acquisition of the Business, Nippon Paper Group will be entering the integrated corrugated paperboard manufacturing business in the Oceania region. Nippon Paper seeks not only to augment the synergistic effects with AP, but also plans to further build the Group’s packaging business on a global scale
Summary of businesses in scope (1) Orora Limited’s paperboard fiber based, packaging business in Australia and New Zealand Businesses in scope include: the B9 Paper Mill, fiber converting, specialty packaging, cartons, bags, functional coatings and Orora WRS packaging distribution
Transaction price and settlement method Enterprise value of AUD1.72 billion in cash, subject to adjustment for movements in working capital and debt items.
(5) Source of funds Financial stability will be ensured in executing this Transaction. Nippon Paper plans to fund through a bridge loan from Mizuho Bank, which will be re-financed by loans from financial institutions, issuing of bonds and hybrid financing and does not expect to fund through the issuance of shares (equity financing).
(6) Transaction scheme After the signing of the contract with Orora, Nippon Paper is considering acquiring through a newly established subsidiary of AP. Funds that will be required to complete the acquisition will be procured through capital increase and loans from Nippon Paper
Business forecast Transaction is expected to complete on January 31, 2020. If the Transaction successfully completes by March 31, 2020, impact from the Transaction on Nippon Paper’s business for the fiscal year ending March 2020 will be announced as soon as details are determined. If the Transaction is not completed by April 2020, there will be no impact on consolidated or non-consolidated financial results for the fiscal year ending March 2020.