Smurfit Kappa signs €51m asset swap deal
Smurfit Kappa has signed an asset-swap deal with UK rival Mondi, which will cost the cardboard box-making giant €51m in cash.
The transaction sees Smurfit, led by chief executive Gary McGann, take over Mondi's UK corrugated box operations, comprising three plants, for €43m in cash. The assets are being taken over on a debt-free basis.
The three facilities turned in full-year earnings before interest, tax, depreciation and amortisation (EBITDA) of €8m last year and €2m of pre-tax profit.
In return, Mondi, which was spun off from mining behemoth Anglo American in 2007 and floated in London and Johannesburg, is taking over Smurfit's four loss-making paper sack converting operations across France, Spain and Italy and a number of sales offices.
Last year, these businesses reported an EBITDA loss of €4.4m and a loss before tax of €12.6m. On disposal, Smurfit will incur exceptional write-off costs of about €30m, including a net-cash cost of €8m.
All told, the deals result in a €12.4m positive EBITDA swing, based on 2009 earnings figures. Still it only amounts to 2pc of group earnings.
"While a small deal, it is incrementally positive for the group, especially when potential synergies are considered," said Robert Eason, an analyst with Goodbody Stockbrokers.
Mr McGann said the asset-swap deal "further strengthens the group's leadership in its core corrugated packaging grade, and enhances the efficiency of its integrated system in the increasingly attractive UK market".
The prospect of a deal getting over the line was given a boost last Friday when the UK Office of Fair Trading said it would not need to refer it for a probe under competition rules.