Smurfit Kappa expands Southeast European footprint with US$151m acquisition

31 Oct 2018 --- Smurfit Kappa, one of the world's largest manufacturers of paper-based packaging products, has acquired Fabrika Hartije Beograd (FHB) paper mill and Avala Ada Beograd (Avala Ada) corrugated plant in Serbia for a consideration of US$151 million (€133 million) from Kappa Star Group.

The company notes the highlights of the transcation as follows:

• The acquisition provides an opportunity to further expand Smurfit Kapp’s Pan European footprint while entering a new, well consolidated and growing market.
• The deal includes a high-quality containerboard mill with a current capacity of 120,000 tons, which secures paper integration in the region with significant production expansion potential. 
• The deal was completed at pre-synergy multiple of 7.6 times the expected full year 2018 EBITDA.

The acquisition is consistent with the company's term plan. This means, its vision lies in corrugated packaging with the support of a mill system or, “an integrated model,” Ken Bowles, CFO at Smurfit Kappa tells PackagingInsights.

The acquisition will expand Smurfit Kappa's geographic footprint and provide for full containerboard integration in the Group's packaging operations in Southeast Europe. FHB and Avala Ada hold leading market positions in Serbia and solid positions in adjacent countries.

“We are pleased to announce our agreement to acquire FHB and Avala Ada, which will be a cornerstone to the expansion of our business in Southeast Europe. We look forward to welcoming their experienced teams into the Smurfit Kappa Group, and we are confident their expertise and the high quality of the companies' asset bases will provide us with an excellent platform to grow in the region and further strengthen our European offering for our new and existing customers,” says Tony Smurfit, CEO, Smurfit Kappa Group.

The containerboard mill holds one recently upgraded recycled containerboard machine with a current capacity of 120,000 tons and significant potential to drive synergies and further increase capacity with a limited investment of capital.

The corrugated plant has a current production of approximately 110 million square meters and produces both corrugated and laminated packaging. Its customer base is predominantly composed of local and national customers, providing a strong platform for organic growth with SKG's Pan European and Multi National customers in the region.

Earlier this year, Smurfit Kappa Group acquired a paper and recycling business, Reparenco, in the Netherlands. The move aimed to increase Smurfit Kappa’s capacity of recycled containerboard in Europe.  

In May, US-based packaging giants, International Paper, announced that they would not be making any further bids to acquire Smurfit Kappa. The latter rejected two approaches from International Paper which were deemed to undervalue the company’s “true intrinsic worth.” This followed the events of February when International Paper provided representatives of Smurfit Kappa's Board of Directors with a proposal to acquire the company.”