Smurfit's Powerflute offloads unit in €38.5m deal
Powerflute, the Finnish packaging group of which Irish businessman Dermot Smurfit is the principal founder and chairman, said it has achieved a "significant return" on a 2009 investment after agreeing to sell its loss-making graphic paper business for €38.5m.
The deal, which will see Powerflute's Papierfabrik Scheufelen division sold to Netherlands-based Paper Excellence, comprises a cash consideration of €32.5m and the assumption by Paper Excellence of €6m in debt. Paper Excellence is a unit of Indonesia's Sinar Mas group.
On completion, the transaction will result in AIM-listed Powerflute moving from a €29.1m net debt position at the end of 2010 to a €5m net cash position. That will include €30m in cash and cash equivalents and remaining interest bearing loans and borrowings of €25m.
The cash element is being paid in two instalments -- the first, of €25m, is payable on completion of the deal and €7.5m falls due on October 31.
Powerflute, which announces its own full-year results today, said the disposal was consistent with its strategy to create value for shareholders through the acquisition and restructuring of underperforming paper and packaging businesses.
It added that Papierfabrik Scheufelen had been "heavily impacted" by developments in worldwide pulp markets during 2009 and 2010.
"We expect these challenging conditions to prevail for the foreseeable future," it said, noting that the division would be "better placed to withstand the challenges it faces as part of an integrated pulp and paper group".
In the year to the end of December 2010, Papierfabrik Scheufelen posted sales of €205m and reported an underlying operating loss of €6.2m.
Powerflute said it has also effectively reversed a €33m non-cash gain recognised when it acquired Papierfabrik Scheufelen in 2009 after it wrote down the value of the net assets in the unit by €22.1m.
A former deputy chairman of Jefferson Smurfit, Mr Smurfit led a consortium of investors that in 2005 acquired Savon Sellu, which later became known as Powerflute.