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SCA to sell packaging business to UK based DS Smith
Tuesday, 17 January 2012
Paper Company SCA sells its packaging operations, excluding the two kraft mills in Sweden, to UK based DS Smith, a leading player in the corrugated packaging manufacturer, collector of waste paper for recycling and a leading UK producer of recycled paper.

The purchase price amounts to EUR 1.7 billion in a debt-free basis.
"Sales are implemented primarily to allow for increased growth in the hygiene business, "said SCA's CEO Jan Johansson in the press release.

Packaging operations, excluding the two kraft mills, 2010 had a net sales of approximately SEK 24.2 billion and operating income excluding restructuring costs of EUR 1.1 billion. The business has approximately 12,000 employees.

"This is the biggest sales in the history of SCA, "says company CEO Jan Johansson.
Divestment will means that the company can concentrate activities on hygiene products. SCA has previously announced that the packaging industry in Europe needs to consolidate.
"We have also said that we do not intend to be the consolidating industry, "says Jan Johansson.
He hopes to use the money from the sale for acquisitions in the hygiene segment.
"We have also found that the health industry needs consolidation. This divestiture allows us to grow in Europe in that area, "he says.

The purchase price represents an EBITDA multiple of 6.3 based on 12-month period fourth quarter 2010 to third quarter 2011.

The transaction requires the approval of DS Smith's shareholders and competition authorities. The deal is expected to close during the second quarter of 2012.

In conjunction with the SCA's disposal of the packaging operations, an impairment of goodwill to be about Skr4 billion, SCA writes in the press release as a result of the deal.

The write-down will be charged in the fourth quarter results in 2011 and recognized as an item affecting comparability.

Earnings per share is reduced by SEK 0.75 based on net income for the 12-month period fourth quarter 2010 to third quarter 2011.

SCA CEO sees nothing in the present situation that could act as an obstacle to derail the deal, although it is not yet approved by DS Smith's shareholders.
"I have not personally participated in discussions with shareholders. But judging by what the company writes in its press release, the shareholders' seem to support, "says Jan Johansson 

The deal was met with jubilation on the Stockholm Stock Exchange, where the company’s B-shares at 10:15 o'clock had risen by almost 11 percent.
By Scancomark.se Team

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