Pacific Equity sets up JV with Swedish toilet-paper maker SCA

Friday 4th November 2011

Australian private equity firm Pacific Equity Partners has got into bed with Swedish toilet-paper maker Svenska Cellulosa Aktiebolaget (SCA), setting up a joint venture to operate the manufacturer’s Australasian businesses.

The deal will give each party a 50 percent stake in a new holding company for the SCA assets, and the Swedish hygiene products manufacturer expects to achieve more efficient financing and to speed up the development of its operations.

SCA will write down its tangible book value by 700 million Swedish krona, though it will receive 3.5 billion krona from the refinancing of the business, it said in a statement. At today’s exchange rate of 5.2236 krona per New Zealand dollars, that works out a $134 million write-down, and will $670 million from the 50 percent divestment of equity.

“This deal strengthens our operations in Australia and New Zealand, and it secures our access to local competence and the local capital market,” Jan Johansson, SCA chief executive said in a statement. “This enables a faster development of the operations.”

PEP’s investment comes after it sold stakes in Independent Liquor and Tegel Foods this year in deals worth a combined $2.14 billion. It floated Collins Food on the ASX in August for A$233 million.

SCA’s Australian, New Zealand and Fijian operations employ some 1,500 people, with net sales of 4.4 billion Swedish krona in 2010, the company said.

The Swedish company’s New Zealand businesses, which come under the SCA Hygiene Holding company, widened its loss to $47.8 million in 2010 from a loss of $15.8 million in 2009, after it booked a $38 million charge on the value of its goodwill, according to financial statements lodged with the Companies Office.

That’s the biggest loss since SCA took over the Caxton paper mill from Carter Holt Harvey in 2004, and was its fourth year in a row where it wrote down the value of its goodwill.

SCA has since sold the Caxton paper mill in 2010 to Auckland property developer McDougall Reidy.

The deal is subject to regulatory approval and is expected to be completed in two to three months.

(BusinessDesk)

BusinessDesk.co.nz

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