Orora to sell fibre business to Nippon Paper for $1.7bn
Orora shares jump as it offloads its fibe business to Nippon Paper and plans to return $1.2bn to shareholders.
Packaging group Orora has announced a $1.72bn deal to sell its Australasian fibre business to Japan’s Nippon Paper, and it set to deliver a $1.2bn windfall to shareholders.
The company said it expects to receive net cash proceeds of $1.55 billion after taxes and costs, and will return about $1.2 billion to shareholders through “capital management initiatives”.
A gain of about $225 million will be recognised as a significant item, Orora said.
Orora shares jumped 17 per cent in early trade to $3.20.
“The Nippon Paper offer represents compelling value for shareholders, reflecting a full price for the Australasian Fibre Business which has reached maturity under Orora ownership and which will now benefit from the synergies and other value enhancements available to Nippon Paper as a strategic acquirer,” said Orora chairman Chris Roberts.
Orora said it would focus on growth in its Australasian beverage and North American businesses, he said.
Orora said it expects the deal to be completed in early 2020.
The deal includes Orora’s B9 Paper Mill, fibre converting, speciality packaging, cartons, bags, functional coatings and Orora WRS packaging distribution.
One Orora investor said Nippon Paper was paying “a very good price” for the assets.
“The company is effectively giving shareholders back $1 per share.”
Orora was advised on the deal by UBS, while Nippon Paper was advised by Macquarie Capital.
Nippon Paper owns Australian Paper which it purchased from Paperlink about 10 years ago.
Like Orora, Paperlink used to be part of Amcor.
The deal involves synergies between both companies and is the second major deal in the industrial space involving a Japanese firm advised by Macquarie Capital in recent months.
In July, Nippon Paint finalised a deal to buy Dulux for $3.8bn.
The Orora deal equates to 11.5 times earnings before interest, tax, depreciation and amortisation.
The sale came after approaches from Nippon Paper.
Orora shares on Wednesday closed at $2.73.
With Dow Jones
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