Packaging conglomerate, Orora (ASX:ORA), has entered into a binding agreement to sell its Australasian fibre business to a wholly owned subsidiary of Nippon Paper Industries for $1.72 billion.
In a statement released on the ASX, Orora said the Nippon Paper offer fully values the Australasian fibre business, which includes the B9 Paper Mill, fibre converting, specialty packaging, cartons, bags, functional coatings and Orora WRS packaging distribution.
The completion of the transaction is expected to occur in early 2020 and according to the company, will not result in the loss of any “meaningful operational or customer related synergies”.
Orora’s Board concluded that the Nippon Paper offer is in the best interests of shareholders.
The estimated net gain after costs and tax is expected to be about $225 million, which the company said will be recognised as a “significant item” and will contribute towards the return of proceeds to shareholders.
“Following completion of the transaction, Orora intends to return in the vicinity of $1.2 billion, being the majority of the net proceeds, to shareholders, in the most efficient way through capital management initiatives,” the statement mentioned.
“It is Orora’s intention to return to its current target leverage ratio once the capital management initiatives are completed.”
Orora chairman Chris Roberts said the Nippon Paper offer reflects a full price for the Australasian fibre business which has reached maturity under Orora ownership and will now benefit from the “synergies and other value enhancements” available to Nippon Paper.
“Orora will now focus on its Australasian beverage and North American businesses, which both have a strong long-term growth outlook and provide opportunity for superior returns on capital for shareholders,” Roberts said.
“The Australasian fibre business has been an important part of Orora since listing on the ASX in 2013. The offer from Nippon Paper is an exciting opportunity for the fibre team to join one of the world’s largest forest, paper and packaging companies, with a strong track record of investment to support growth, including in people and technology.”
Orora managing director and CEO Brian Lowe said the fibre business’ transition to Nippon Paper will result in some redundancy.
“As a more streamlined group of businesses, there may be some reduction in roles required to support the Orora Group activities going forward,” he said.
“We recognise the effect that this could have on our people and will be working closely with all potentially affected by [the] announcement.”