Smurfit Kappa has acquired Orange County Container Group (OCCG) for US$340m (€240m) and predicted synergy benefits of $14m within two years.
The firm said the deal significantly strengthens their position in Mexico and gives them a small position in an increasingly consolidated US market.
The acquisition will see employees transfer to Smurfit Kappa and the rest of the OCCG business will be progressively integrated with Smurfit Kappa’s operations in Mexico.
Synergy scope
There is significant scope to transfer some of the European recycled containerboard and corrugated innovation and production experience to the OCCG mill and corrugated operations, said the firm.
Smurfit Kappa’s containerboard and corrugated Mexican business includes three paper machines and nine box plants with containerboard production of 295,000 tonnes and corrugated shipments of 500 million square metres for the 12 months to June.
The transaction is expected to be completed in Q4 2012 and Smurfit Kappa said it is expected to generate $53m of EBITDA for this full year.
OCCG is a packaging manufacturer operating in Northern Mexico and the Southern United States.
It has eight packaging facilities in Mexico, comprising two box plants, three sheet plants and three fulfilment centres and two packaging facilities in the US, comprising one box and one sheet plant.
The business also produces 290,000 tonnes of recycled containerboard on two paper machines in Dallas and operates seven wholly owned recycling centres in Texas, Oklahoma and Arkansas.
OCCG employs 2,800 people, 2,000 are based in Mexico and 800 in the US.
Immediate growth
Gary McGann, Smurfit Kappa Group CEO, said: “We look forward to welcoming the excellent team from OCCG into the Smurfit Kappa Group and we are confident that their skills and expertise will complement those of our colleagues in the relevant markets.
“The acquisition delivers immediate earnings growth for SKG and significantly strengthens our existing position in the Mexican market,” he said.
“The continued strength of our operating performance and consequent net debt reduction has increased the range of strategic and financial options for the group. The acquisition of OCCG provides a complementary portfolio of well-invested assets and quality people.
“This transaction further increases the contribution of our existing successful Latin American business; providing us with a very significant position within the key Maquiladora trading region and substantially strengthening our position in the higher growth Mexican market.”
