The Japanese company's move is part of a doubled-headed strategy to become a leading player in the region, according to one expert analyst
Visy Industries is currently one of the biggest paper business in the region, with Visy Pulp and Paper's sales revenue at a reported 566m Australian dollars ($385m) in 2018 (Credit: Pixabay)
Japanese company Nippon Paper is looking to challenge Australian paper, packaging and recycling giant Visy with the purchase of Orora’s fibre-based business, according to data analytics firm GlobalData.
Visy Industries, owned by Australian billionaire Anthony Pratt, is one of the biggest paper businesses in the region, with Visy Pulp and Paper’s sales revenue a reported 566m Australian dollars ($385m) in 2018.
GlobalData consumer insights analyst Shagun Sachdeva believes Nippon Paper’s move is part of a doubled-headed strategy to become a leading player in paper packaging and take on one of the market leaders.
She said: “The Australasian fibre business includes B9 Paper Mill, units of fibre converting, specialty packaging, cartons, bags, functional coatings and WRS packaging distribution.
“The deal seems to be a part of Nippon Paper’s two-pronged strategy of becoming a stronger player in paper packaging and to compete with market leader Visy Industries.
“According to GlobalData, the total packaging material market is growing at a steady pace in Australia and is expected to cross eight billion kilogrammes in 2022.
“With all major forms of packaging, including flexible, glass, paper, metal and plastic, growing positively in Australia, it becomes strategically imperative for Nippon to expand its portfolio.”
Nippon Paper’s purchase of Orora’s fibre-based packaging mill means it can meet emerging customer needs
Announced last week, the acquisition — worth an enterprise value of $1.72bn Australian ($1.1bn US) — will be made by the Japanese company’s fully-owned subsidiary Australian Paper.
The purchase includes the Botany Paper Mill — a developer of speciality packaging, folding cartons, sacks and bags — WRS packaging distributions and associated businesses.
This move is aligned with Nippon Paper’s strategy to expand through packaging as one of its key focus areas.
Australian Paper’s COO Peter Williams said: “As a major domestic packaging paper manufacturer we are positioning our operation for ongoing success in this growing sector.
“With the acquisition Australian Paper will improve our ability to meet emerging customer needs.
“The Orora fibre packaging business is a strong fit with our existing operation and provides an opportunity for Australian Paper to broaden its value proposition.
“The two companies have a long-standing successful business relationship based on the supply of kraft linerboard and bag and sack papers.
“This will allow us to expand into new sectors such as box and carton manufacture along with paper bags and sacks, and other specialty products bringing us closer to end markets.”
The deal is subject to final approval from the authorities, with the deal expected to be completed during the fiscal year ending in March 2020.
Sale of fibre business will allow Orora to focus on glass and aluminium cans in Australasia, according to analyst
The sale of its paper manufacturing to Nippon Paper will allow Orora to focus on other sides of its business in Australasia, according to GlobalData analyst Sachdeva.
She believes the company is likely to focus attention on growing its work on glass and aluminium beverage cans.
Sachdeva said: “Nippon Paper had identified paper packaging as a key growth area under its Sixth Medium-Term Business Plan in 2018 due to growing environmental and garbage disposal concerns over plastic.
“The deal will also allow Australian Paper, a wholly owned unit of Nippon Paper, to foray into new categories such as box and cartons, in addition to paper bags and sacks.
“On the other hand, Orora can focus on higher-growth Australasian glass and aluminium beverage cans business where it has stronghold.
“It will also retain its North American packaging business, where it is a dominant player.”