Mondi Group, Europe’s largest maker of office paper, agreed to buy Nordenia International AG to boost its consumer packaging business.
Mondi will buy 93.4 percent of Nordenia from Oaktree Capital Management LP for 240 million euros ($294.4 million) in cash and will take on 398 million euros of debt and liabilities, implying a value for the whole company of 655 million euros, Mondi said in a statement today. The cash payment will be funded from a new 250 million euro two-year bank facility, Johannesburg-based Mondi said.
Consumer packaging, which includes re-closable bags, stand-up pouches and laminates, makes up about 60 percent of Greven, Germany-based Nordenia’s revenues, while hygiene components contribute about 40 percent.
“This deal significantly reduces the chance of a special dividend at the end of fiscal 2012,” Mohamed Kharva, an analyst at Nedgroup Securities Ltd., said by phone from Cape Town. “They do have sufficient cash flow to finance debt.”
Today’s transaction was larger than expected considering Mondi’s consumer packaging business has been relatively small, Kharva said.
The purchase is expected to lift Mondi’s earnings “immediately” and bring savings of more than 15 million euros a year by 2014, the company said. The company plans to complete the deal in the last quarter of this year.
While Mondi has become “more cautious” on the pulp side of its business, the company is “very focused” on corrugated and consumer packaging and has been looking for opportunities in these areas, Chief Executive Officer David Hathorn said in a conference call today.
When the transaction is complete, Mondi will reorganize its Europe and International division into four businesses: uncoated fine paper, packaging papers, fiber packaging and consumer packaging. Nordenia will form part of the consumer packaging unit.
Mondi shares fell 1 percent to 70.60 rand at the 5 p.m. close in Johannesburg, in line with the 0.8 percent slide in the FTSE/JSE Africa All Shares Index. Mondi’s credit-rating outlook was changed to stable from positive at Moody’s Investors Service, while Nordenia was placed under review for an upgrade, Moody’s said in a statement today. Standard & Poor’s Ratings Services also revised its outlook to stable from positive, while affirming its BBB- long-term corporate credit rating.
“The stable outlook reflects our view that Mondi will be able to sustain credit metrics commensurate with our rating, despite weakening operating conditions in Mondi’s main markets,” Standard & Poor’s said in a statement.