Page 10 - Packaging News Nov-Dec 2019

10 NEWS EXTRA www.packagingnews.com.au November-December 2019 What’s in the box?
Nippon Paper is buying Orora’s Australasian Fibre business for $1.72bn in a shake-up of the carton market. PKN associate editor Wayne Robinson assesses the implications of Nippon’s biggest investment yet.
ORORA is selling its Australasian Fibre business to a wholly owned subsid- iary of Nippon Paper for A$1.72bn, in a move that will give Nippon an integrated box-making line to compete head on with Visy.
Nippon will be buying a business with 10,000 customers, 25 plants, and 27 depots across Australia and New Zealand. Revenues in the last financial year were around $1.4bn, with EBITDA a smidge under 10 per cent at $137m.
The purchase includes the Orora plant in Oakleigh with the country’s first EFI Nozomi digital high speed, sheetfed, full-colour carton printing line.
Orora’s share price rocketed skywards by 20 per cent on the news, although it then lost half of that as profit takers moved in.
Speaking to PKN on the day of the deal, Orora managing director and CEO Brian Lowe said, “Orora was not looking to sell – the interest and the bid came from Nippon.” The Orora Board declared it “a compelling offer” to shareholders. The sale is expected to be completed early next year.
Lowe went on to say that Orora felt the Fibre business had “reached maturity”
under its tenure, but that Nippon, with its ability to source its own paper and board, “could take the business forward.”
Nippon Paper is no stranger to Austra- lian shores: a decade ago it bought Austra- lian Paper, the country’s sole manufacturer of copier and printer paper, and of enve- lopes, for $700m. It fought and succeeded in a lengthy court battle to prevent what it claimed was dumping by overseas compet- itors, with the judges eventually agreeing with its assessment. Nippon is now mak- ing another major investment in Austra- lian Paper, with a new $600m energy from waste plant for its Maryvale mill.
Nippon has annual sales of around $15bn. Its acquisition of Orora’s Fibre busi- ness will be its largest deal outside of Japan.
INTEGRATION
Nippon’s ownership of the Orora fibre business will deliver integration, as Nippon already supplies Orora with its Kraftliner with which it makes its corru- gated boxes. The new business will be up against market leader Visy, which also has integrated production. According to Tim Woods at IndustryEdge, Visy has just over half the market, with Orora a third.
The Nippon Orora deal came just days after Visy said it would buy the 265,000-tonne-per-year Norske Skog newsprint mill in Albury, with a view to converting it to board manufacturing.
Woods’ figures have the Australian con- tainerboard market at 1.332 million tonnes, with an average growth of 5.6 per cent a year over the past five years. The last financial
year actually showed a dip, due entirely to the drought and the subsequent impact on crops. Less than ten per cent is imported, and almost all of that from New Zealand.
In a sign of how industry ownership cycles around, Nippon will now own both mills previously owned by Amcor: Orora’s in Botany, and the Australian Paper mill at Maryvale in the Latrobe valley. Amcor released the Maryvale mill as part of its Paperlinx spin-off almost 20 years ago, with Botany part of the Orora spin-off in 2013.
The deal values the business at a multi- ple of around 11.5 times its EBITDA, and adjusted EBIT multiple of 18.9. The Orora board says these multiples are above current market valuation.
Once sold, it will leave Orora with 80 sites and some 3500 staff in seven coun- tries, and a business with revenues of $3.4bn.
Orora says the deal “fully values the Australasian Fibre business, with reference to the outlook for the business”. It includes
This announcement represents an exciting new era for both Orora and the Fibre business as it transitions to Nippon Paper.”
– Brian Lowe, Orora
IMAGE COURTESY ORORA