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Shares in packaging company Orora (ASX: ORA) have surged 19 per cent this morning after the Melbourne-based group announced it would be selling its Australasian fibre business to a subsidiary of Japan's Nippon Paper Industries for $1.72 billion.
Orora estimates a net gain after costs and tax of $225 million, with the sale price representing an adjusted EBITDA multiple of 11.5x.
The business to be sold includes the B9 Paper Mill, fibre converting, specialty packaging, cartons, bags, functional coatings and Orora WRS packaging distribution
Chairman Chris Roberts says Nippon's offer presents compelling value for shareholders.
"Orora will now focus on its Australasian Beverage and North American businesses which both have a strong long term growth outlook and provide opportunity for superior returns on capital for shareholders," says Roberts.
"The Australasian Fibre Business has been an important part of Orora since listing on the ASX in 2013.
"The Offer from Nippon Paper is an exciting opportunity for the Fibre team to join one of the world's largest forest, paper and packaging companies, with a strong track record of investment to support growth, including in people and technology."
Managing director and CEO Brian Lowe says the announcement represents an exciting new era for the company and the fibre business as it transitions to Nippon Paper.
"Orora Group will retain the market leading Beverage business, which manufactures ~65% of Australia's wine bottles, is the leading manufacturer of aluminium cans in the Australasian region and has exclusive rights to produce STELVIN® wine closures," says Lowe.
"The Beverage business has a history of sustained growth, innovation and profitability. Orora's North America businesses likewise operate in attractive segments and, following recent initiatives, are well positioned to drive future growth and cash flow generation.
"As a more streamlined group of businesses, there may be some reduction in roles required to support the Orora Group activities going forward. We recognise the effect that this could have on our people and will be working closely with all potentially affected by today's announcement."
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