SCA Makes $1.4 Billion Bid for Vinda in China Tissue PushJanina Pfalzer and Vinicy Chan
Svenska Cellulosa AB, Europe’s largest paper-tissue maker, made an offer for the rest of China’s Vinda International Holdings Ltd. it doesn’t already own to tap rising demand for hygiene products in Asia.
The Swedish company is offering HK$11 a share in cash for Vinda, representing a 35 percent premium to the average closing price in the past 30 trading days and valuing the Chinese company at 9.4 billion kronor ($1.4 billion), it said in a statement. SCA, based in Stockholm, already owns 21.7 percent of Vinda, the third largest tissue company in China.
SCA, the maker of Tempo tissue and also Europe’s biggest private forest owner, is transforming itself into a personal-care and hygiene business from a traditional paper company after the sale of its packaging unit last year. SCA first took a stake in Vinda in March 2007 to tap growth in the Chinese tissue market, the world’s second largest.
“It’s a reasonable price,” Karri Rinta, a Stockholm-based analyst at Handelsbanken, said by phone. “From a demand perspective the Chinese market is still very attractive.”
Vinda’s sales increased 26 percent to about 5 billion kronor in 2012, with an operating profit margin of 12.9 percent.
The Chinese company rose 37 percent to HK$10.88 in Hong Kong trading, the most in more than six years. SCA ended trading little changed at 165.40 kronor in Stockholm, valuing the Swedish company at 117 billion kronor.
SCA is seeking acquisitions globally and has as much as 9 billion kronor to spend on purchases, Chief Executive Officer Jan Johansson said in January.
SCA, which wants Vinda to remain listed on the Hong Kong Exchange, said it would like to take a more active role in developing the business.
“Vinda is a strong player in the Chinese tissue market and has demonstrated healthy growth and profitability,” Johansson said today. “As a majority shareholder, we would see the potential to further strengthen the company to ensure its future competitiveness.”
The offer is conditional upon reaching a holding representing more than 50 percent of the votes. SCA will publish its prospectus before Sept. 30 and expects to complete the purchase in the fourth quarter.
JPMorgan Chase & Co., the sole financial adviser to SCA on the deal, has granted the Swedish company a credit facility of $1.1 billion, the company said.
SCA sold its packaging business to DS Smith Plc last year and has been focusing on the hygiene segment, which now represents 80 percent of annual sales, compared with 46 percent in 2000. The company has focused on expansion in Asia, Latin America, Eastern Europe and the Middle East, targeting markets with improving living standards and an aging population.
SCA last year agreed to buy Taiwan-based Everbeauty for about 1.9 billion kronor, adding diapers and incontinence product sales in China, Taiwan and southeast Asia.
The acquisition may also help to cushion the impact of the strong krona on earnings.
Sweden’s exporters have been harmed by the strong krona, which has appreciated about 25 percent against the euro since early March 2009 at the height of the global financial crisis, hurting companies with production in Sweden and most of their sales in Europe.
While the krona has weakened from a low of 8.2861 in March this year and traded at 8.7513 against the euro today, Sweden’s National Institute of Economic Research forecast the krona will move to 8.51 against the euro next year and 8.39 in 2015. Sweden’s SKF AB, the world’s largest maker of bearings, last week offered to buy Kaydon Corp. for $1.25 billion to expand its U.S. operations and add velocity control products.