10/10/2019 - 09:33

Orora to sell packaging unit for $1.7bn

10/10/2019 - 09:33

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Orora shareholders are in line to pocket $1.2 billion after the company decided to offload its cardboard packaging unit to Japan's Nippon Paper for $1.7 billion.

Orora to sell packaging unit for $1.7bn
Orora listed on the ASX in 2013 after it was demerged from Amcor.

Orora shareholders are in line to pocket $1.2 billion after the company decided to offload its cardboard packaging unit to Japan's Nippon Paper for $1.7 billion. 

The ASX-listed materials firm today said the deal - to be completed in early 2020 - would allow it to focus on expanding its Australasian canning and bottling unit and its North American business. 

News of the deal sent Orora shares as much as 20 per cent higher to $3.28 in the first 15 minutes of trade today, bringing the company's stock back on parity with its price a year ago, before soft financial results took a toll. 

Orora said it expected to receive net cash proceeds of $1.55 billion after taxes, transaction costs, restructuring costs and customary closing adjustments, with shareholders to receive $1.2 billion through unspecified capital management initiatives.

The company's estimated net gain on the deal after costs and tax is $225 million, which will be recognised as a significant Item. 

Orora said the Nippon offer represented compelling value for shareholders, but also flagged possible staff cuts on account of it becoming a more streamlined operation

"We recognise the effect that this could have on our people and will be working closely with all potentially affected by today's announcement," chief executive Brian Lowe said.

The company listed on the ASX in 2013 after it was demerged from Amcor.

It lost nearly 17 per cent of its share price in August on a weak full-year result. 

Nippon Paper's acquisitions have included Australian Paper in 2009 for approximately $700 million, and the Weyerhaeuser liquid packaging board business in 2016 for $US285 million. 

The Orora fibre purchase will be Nippon's largest investment outside Japan. 

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