Australia’s Orora to sell fibre arm to Japan’s Nippon Paper for $1.2b

Photo: Orora website

Australian packaging maker Orora Ltd said Thursday it will sell its local fiber materials business to Japan’s Nippon Paper Industries for A$1.72 billion ($1.15 billion), simplifying its operations and sending its shares up 20%.

The deal is the latest in a crop of Japanese buyouts of Australian companies which includes Japan’s Nippon Paint’s takeover of the country’s best known paint firm, DuluxGroup, for A$3.8 billion earlier this year.

The sale would be the third-largest Australian acquisition by a Japanese company this year, according to Refinitiv data.

Orora, which plans to return the bulk of the funds from the sale to shareholders, said it would focus on its higher growth Australasian glass and aluminum beverage and North American businesses.

“(The sale) fully values the fiber business and provides a streamlined opportunity for the Orora business going forward,” Chief Executive Brian Lowe told a media call.

Shares of Orora surged as much as 20.2% and were set for their strongest one-day percentage gain since the stock’s debut in 2013.

The deal highlighted renewed interest in businesses such as cardboard, which is now widely used by delivery services such as Amazon to transport product, and allowed Nippon to take advantage of a weak Australian dollar, said James McGlew, executive director of corporate stockbroking at Argonaut.

“With the Australian dollar at low levels at the moment, it means they’re getting bigger bang for their yen out of acquisitions in Australia,” McGlew said.

Australian Paper, a wholly owned unit of Nippon Paper, welcomed the sale.

“(The deal) will allow us to expand into new sectors such as box and carton manufacture along with paper bags and sacks … bringing us closer to end markets,” Peter Williams, chief operating officer of Australian Paper, said in a statement.

Orora said it expects a net gain of about A$225 million from the deal, which is set to close in early 2020, pending regulatory approval in Australia and New Zealand.

The sale will make net cash proceeds of about A$1.55 billion from an enterprise value of A$1.72 billion and Orora intends to return about A$1.20 billion of that to shareholders through capital management initiatives.

Orora also flagged some job cuts, saying there may be some reduction in roles going forward.

Reuters

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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