Smurfit Kappa Enters Brazilian Packaging Market

Smurfit Kappa has acquired two integrated paper-based packaging businesses, Industria de Embalagens Santana and Paema Embalagens, based in Brazil, for a total consideration of approximately €186 million (R$805 million).

Both INPA and Paema are privately owned integrated packaging businesses. The combined operations have three recycled containerboard mills with a total capacity of 210,000 tonnes and four corrugated facilities servicing the Northeast of Brazil, through the Rio and Sao Paulo regions and the South of the country. The net assets of INPA and Paema at 30 September 2015 were €30 million (R$129 million) and €6 million (R$26 million) respectively.

The size and location of the combined operations will build on the Group’s leadership position as the largest  pan-regional corrugated packaging supplier in Latin America.  SKG will also enhance the two businesses through the application of the Group’s best-in-class operating systems and design and innovation capability. Furthermore, the Group’s enlarged global footprint will improve its packaging offering to multinationals operating throughout The Americas region.

The combined business employs over 1,700 people and the Group currently expects to generate synergies of approximately €6 million (R$28 million) to be delivered by the end of 2017, primarily through operational improvements and supply chain optimisation as the businesses are integrated. As a consequence, the post synergy 2015 EV/EBITDA multiple of the combined business is expected to be 6.3 times.

The transaction was completed at the end of December 2015 and will be immediately earnings accretive. The consideration was funded from the Group’s existing liquidity, comprising primarily cash resources together with the existing committed credit facilities.