Smurfit Kappa acquires two Brazilian packaging companies for €186m

Monday, Jan 04, 2016

Packaging group Smurfit Kappa has announced the acquisition of two Brazilian companies for €186 million.

The company has acquired integrated paper-based packaging businesses Industria de Embalagens Santana (INPA) and Paema Embalagens (Paema). Both are privately owned integrated packaging businesses.

The combined operations have three recycled containerboard mills with a total capacity of 210,000 tonnes and four corrugated facilities servicing the northeast of Brazil through the Rio de Janeiro and Sao Paulo regions, as well as the south of the country.

The net assets of INPA and Paema on September 30th 2015 were €30 million (R$129 million) and €6 million (R$26 million) respectively.

In a statement, Smurfit Kappa said the size and location of the combined operations would build on the its leadership position as the “largest pan-regional corrugated packaging supplier in Latin America”.

“Furthermore, the Group’s enlarged global footprint will improve its packaging offering to multinationals operating throughout The Americas region,” it said.

The combined business employs over 1,700 people and the company currently expects to generate synergies of approximately €6 million (R$28 million) to be delivered by the end of 2017, primarily through operational improvements and supply chain optimisation as the businesses are integrated.

The transaction was completed at the end of December and will be immediately earnings accretive. The consideration was funded from the company’s existing liquidity, comprising primarily cash resources together with the existing committed credit facilities.

In a note to investors, Davy’s said the acquisitions marked Smurfit Kappa’s “long-awaited entry” to the Brazilian market.

“That it has done so at a pre-synergy multiple of sub-8x EBITDA justifies management’s patience in finding the right deals,” it said.

“It also confirms the company’s stated strategy of building out its platform in the Americas. Smurfit Kappa remains our top pick in the sector and we are happy to reiterate our 3200c price target – 36 per cent above the current price level.”

Smurfit Kappa Group chief executive Tony Smurfit said he was “pleased” to announce the acquisitions and that they would “extend our reach into a strategically important market and build on our geographic diversity and strength”.

“We look forward to welcoming the experienced teams into the Smurfit Kappa Group,” he said.

“We are confident that their expertise and the high quality of their asset base will provide us with a strong entry point into the Brazilian market and, as the leading pan-regional operator in Latin America, further strengthen our service offering to our existing international customers.”

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