Packaging manufacturer merger to go ahead

Photo: Orora

Australian Paper will go ahead with its proposed acquisition of Orora Fibre, after the Australian Competition and Consumer Commission (ACCC) said it would not oppose the acquisition.

First announced in October, the $1.72 billion sale will see the package manufacturing division of Orora sold to Australian Paper which is a wholly owned subsidiary of Japanese company Nippon Paper Industries as well as a supplier to Orora.

Australian Paper is the only domestic supplier of certain paper packaging inputs made from kraft fibre. Following the proposed acquisition, it would become vertically integrated with one of its major customers, Orora Fibre, which currently uses Australian Paper’s kraft products in the construction of sacks, bags and cardboard boxes.

Orora Fibre Packaging is a supplier to food, beverage and industrial manufacturers, offering design and testing through to supply chain integration. The transaction will cover certain assets owned by Orora and not the whole of the business

“The key focus of the ACCC’s investigation was the impact of Australian Paper vertically integrating with a paper packaging manufacturer. We decided not to oppose this acquisition because we considered that imports and other Australasian producers of packaging paper products would continue to provide options for buyers,” ACCC commissioner, Stephen Ridgeway, said.

The ACCC looked closely at the likely impact of this acquisition on other buyers of packaging paper products. In particular, it considered the market for kraft linerboard, as this is a key input for the manufacture of durable corrugated cardboard boxes.

“Although imports of kraft linerboard, used to make cardboard boxes, are currently limited we found that it is readily traded globally and is produced by several manufacturers around the world. If kraft linerboard was no longer available in Australia, we think Australian purchasers would be able to import this product at competitive prices,” Ridgeway said.

“We also considered that Australasian suppliers, such as Visy, Oji Fibre Solutions or Australian Paper would likely still have the incentive to continue to supply Australian customers.”

When the acquisition was announced in October, Orora chairman, Chris Roberts, said the opportunity for the Fibre team to join “one of the world’s largest forest, paper and packaging companies” would enable Orora to benefit from the synergies and other value enhancements available to Nippon Paper as a strategic acquirer.

“Orora Group will retain the market leading Beverage business, which manufactures ~65% of Australia’s wine bottles, is the leading manufacturer of aluminium cans in the Australasian region and has exclusive rights to produce STELVIN wine closures. The Beverage business has a history of sustained growth, innovation and profitability,” Orora managing director and CEO, Brian Lowe, said.