Australia’s richest man Anthony Pratt will have a more powerful competitor in Australia after Nippon Paper acquires Orora’s fibre operations to re-create the old Amcor.
Pratt’s Visy is the clear market leader in cardboard boxes with around 55 per cent market share against Nippon’s 35 per cent .
But the $1.7bn Orora fibre deal will mean Nippon owns a big recycling operation and the box business to go with its previously acquired Kraft liner board.
Orora boss Brian Lowe has been in the job for just 10 days, but ran the fibre business for five years before that, so he knows the business.
After the deal, Orora’s bottle and can business and US operations will generate revenues of around $3.4bn and earnings before interest, tax, depreciation and amortisation of $350m.
This compares with the fibre business being sold with revenues of $1.4bn and earnings $137m.
Talks between the two sides have been ongoing for the past three months, so were well advanced before former Orora CEO Nigel Garrard handed over the keys at the end of last month.
The combination is a logical move from Nippon’s perspective, but represents one more Australian industry to move offshore.
The market likes the deal with Orora up 17.6 per cent at $3.21 a share in intraday trading.
The deal was done at 11.5 times earnings, compared with Orora’s historical valuation at around 8 times, so represents clear value for shareholders.
Orora said it would deliver $1.2bn in proceeds to shareholders.
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