ACCC okays $1.72bn sale of Orora Fibre

Comments Comments

The Australian Competition and Consumer Commission is approving Orora’s sale of its Australasian fibre business to Nippon Paper subsidiary Australian Paper.

Orora: B9 paper recycling line at Botany
Orora: B9 paper recycling line at Botany

Orora entered into a binding agreement to sell its fibre business in October, for $1.72bn as the result of what it said was an unsolicited bid from Nippon..

Nippon will be buying a business with 10,000 customers. There are 25 plants and 27 depots across Australia and New Zealand. Revenues in the last financial year were around $1.4bn, with an EBITDA a smidge under 10 per cent at $137m. It incudes the Orora plant in Oakleigh with the country's first EFI Nozomi digital high speed, sheetfed, full-colour, carton printing line.

According to the ACCC Australian Paper is the only independent, non-vertically integrated, domestic supplier of certain paper packaging inputs made from kraft fibre. After the acquisition, it would become vertically integrated with one of its major customers, Orora Fibre.

ACCC commissioner Stephen Ridgeway said the key focus of the investigation was the impact of Australian Paper vertically integrating with a paper packaging manufacturer.

“We decided not to oppose this acquisition because we considered that imports and other Australasian producers of packaging paper products would continue to provide options for buyers,” Ridgeway said.

“Although imports of kraft linerboard, used to make cardboard boxes, are currently limited, we found that it is readily traded globally and is produced by several manufacturers around the world. If kraft linerboard was no longer available in Australia, we think Australian purchasers would be able to import this product at competitive prices.”

ACCC: commissioner Stephen Ridgeway
ACCC commissioner: Stephen Ridgeway

Ridgeway said the ACCC also considered that Australasian suppliers, such as Visy, Oji Fibre Solutions, or Australian Paper, would like still have the incentive to continue to supply Australian customers.

The new business wil be up against market leader Visy, which also has integrated production. According to Tim Woods at IndustryEdge Visy has just over half the market, with Orora a third.

Woods' figures have the Australian containerboard market at 1.332 million tonnes, with an average growth of 5.6 per cent a year over the past five years. The last financial year actually showed a dip, due entirely to the drought and the subsequent impact  on crops. Less than ten per cent is imported, and almost all of that from New Zealand.

The Nippon Orora deal comes just days after Visy said it would buy the soon-to-be-closed Norske Skog 265,000 tonnes a year newsprint mill in Albury, with a view to converting it to board manufacturing.

Nippon will now own both mills previously owned by Amcor; in Botany and the Australian Paper mill in LaTrobe valley. Amcor released LaTrobe valley as part of its Paperlinx spin off almost 20 years ago, with Botany part of the Orora spin off in 2013.

comments powered by Disqus