ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Business deals

Australia's Orora to sell fiber arm for $1.2bn to Nippon Paper

Shareholders to receive bulk of sale's proceeds; stock soars 20%

Corporate Japan is on an acquisition spree in Australia, with the Nippon Paper deal being the third largest by a Japanese company this year.

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)

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media