'Forest Products' Archive
Although the $338 million sale of Blue Ridge Paper didn’t make the top headlines alongside Chrysler and American Home Mortgage last week, the deal has significance as the most recent step in reclusive New Zealand billionaire Graeme Hart’s aggressive consolidation effort in the forest products industry
Blue Ridge Paper, which makes milk and juice cartons and other paper products, is the latest in a string of paper/packaging acquisitions made by Hart’s Rank Group Limited (no relation to UK gaming firm The Rank Group), including Carter Holt Harvey and Evergreen Packaging (both formerly controlled by International Paper).
News reports rank Hart’s beverage carton operations #2 in the global field after he won a $2.3 billion bidding war over SIG Holding earlier this year. It seems Hart has his sights set on challenging #1 carton-maker Tetra Laval. Rank Group has been burning through the money raised from asset sales from its previous empire, food (see Burns Philp).
Thus far the Blue Ridge deal seems fairly positive for its employees, who were company shareholders (alongside KPS Capital) and received cash for their ESOP holdings as well as a reworked union bargaining deal; hopefully these measures won’t be blasted by the industry’s trend of plant closures.
My guess, however, is that Mr. Hart will take further steps to centralize and consolidate management and operations in his new packaging kingdom, perhaps sloughing off some unwanted niche assets in the process. He has already sold Carter Holt Harvey’s timberlands, and it doesn’t seem too far gone to speculate that there may be other acquired mills and plants that won’t fit into Graeme’s grand packaging scheme. Likewise, I wouldn’t be surprised to see more strategic paper purchases in Rank’s near future.
Soon-to-be-married papermakers Abitibi and Bowater received shareholder approval for their merger last week, despite a modicum of dissent earlier on. Third Avenue Management, which owns a 12% stake in Abitibi, figured the deal was unfair to Abitibi shareholders, who will end up owning 48% of the combined entity while Bowater holders receive a 52% stake. Indeed, the distribution seems questionable when you consider that Abitibi has more assets to contribute, but apparently most shareholders believe the inequity is offset by potential financial improvements.
The combined AbitibiBowater will become a top 10 global paper company and a top 5 player in North America. Through the merger, Abitibi and Bowater expect to save $250 million in costs and have combined revenue of $8 billion. While the deal will likely ease the companies’ suffering from lower demand for newsprint and other paper types, that trend will continue to create challenges even for a larger market player.