Smurfit Kappa to pay $340m for US firm

Dublin-headquartered paper and packaging business Smurfit Kappa Group has agreed to acquire US containerboard manufacturer Orange County Container Group for $340m (€260m) in a deal aimed at boosting its presence in Mexico.

The deal — which is subject to regulatory approval and is expected to be completed during the fourth quarter of this year — should be earnings per share accretive upon completion and is expected to deliver at least $14m in synergies by the end of the second year of ownership. The deal is being funded from SKG’s cash resources.

“The acquisition delivers immediate earnings growth for SKG and significantly strengthens our existing position in the Mexican market,” said SKG chief executive Gary McGann.

Regarding SKG’s ability to undertake such a sizeable deal, Mr McGann added: “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. SKG has a proven track record of identifying, acquiring and integrating businesses. This transaction creates synergies for the group delivering value and earnings growth for our shareholders.”

OCCG is a major player in the North American integrated packaging sector, employing 2,800 people. Its main bases are in northern Mexico — where 2,000 employees are based — and the southern part of the US. The group produces 290,000 tonnes of recycled containerboard from two paper machines in Dallas and operates seven recycling centres across Texas, Oklahoma, and Arkansas. It also has seven distribution centres in Mexico.

SKG’s non-European exposure is expected to increase from 23% to 26% of group earnings on the back of this deal.