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BillerudKorsnäs boosts North American coated paper position with US$825M Verso acquisition

January 9, 2022
Energy & Chemical Value Chain

BillerudKorsnäs is set to acquire Verso, a North American coated paper producer, for approximately US$825 million in cash, corresponding to US$27 per share. The transaction is expected to close in the second quarter of 2022.

Verso recorded net sales for the last twelve months ending September 30, 2021, of US$1,264 million and adjusted EBITDA of US$158 million.

BillerudKorsnäs indicates it will build one of the most cost-efficient and environmentally sustainable paperboard platforms in North America by converting some of Verso’s assets into paperboard machines with an estimated capex of up to SEK 9 billion (US$1 billion). The company also aims to maintain its position as a quality and cost leader in specialty and coated wood-free paper.

Strategic rationale
Verso’s strategic assets are positioned in a region with abundant and cost-effective fiber supply suitable for the production of premium packaging materials. Its location also presents favorable export opportunities to both Asia and Europe.

The business will become the platform for BillerudKorsnäs’ future expansion in North America and is expected to provide continuous growth opportunities over the next ten years and beyond.

The combined company will be one of the largest virgin fiber paper and packaging providers with a cost and quality advantage.

“The combination of BillerudKorsnäs’ expertise in high-quality virgin fiber packaging materials and Verso’s attractive assets creates an excellent platform for long-term profitable growth,” reiterates Christoph Michalski, BillerudKorsnäs’ president and CEO.

“We will obtain cost-effective production of coated virgin fiber material in the Midwestern United States. We also plan to sequentially transform part of the business into paperboard production while continuing to serve the US customers.”

“Our investments will create new US-based jobs in a growing market and accelerate the transition from plastic-based packaging materials to renewable sources.”

Converting assets into board production
The plan is to convert Verso’s largest facility, the Escanaba mill in Michigan, into a fully integrated paperboard production site. One machine is estimated to be converted by 2025 and a second by 2029, with a combined capacity of around 1,100 kilotons.

Moreover, BillerudKorsnäs plans to continue operating the Quinnesec mill in Michigan. This mill has an annual capacity of around 400 kilotons of paper and 200 kilotons of market pulp, focusing on graphical paper, specifically in coated wood-free and specialty papers.

Climate change recognition
In other news, BillerudKorsnäs has been awarded the Climate Prize as part of the supplier engagement initiative “Join us in protecting the planet,” led by Tetra Pak. The company, which is one of BillerudKorsnäs’ most important customers, launched this initiative last year to create a movement to accelerate environmental sustainability actions across its value chain.

Through a long-standing ambition to phase out all fossil fuels in production processes, BillerudKorsnäs boasts a more than 97% fossil-free production. In 2025, it aims to have its first fossil-free mill. In 2030, all integrated mills should reach this same fossil-free status.

Meanwhile, the European Commission has proposed new rules to curb EU-driven deforestation in a move welcomed by the Alliance for Beverage Cartons and the Environment (ACE) and its members BillerudKorsnäs, Elopak, SIG, Stora Enso and Tetra Pak.

However, ACE is concerned the Forest Strategy views the forest “almost exclusively as a carbon sink,” failing to recognize paper-based packaging’s entire value chain benefits, including its relatively low carbon impact, food safety and recyclability.

BillerudKorsnäs recently designed high-performance secondary packaging for Oatly’s plant-based milk produced at its new Singapore factory. The corrugated box comprises primary fibers, ensuring strength and product protection throughout Asia’s high humidity supply chains.

By Joshua Poole

Source: packaginginsights.com

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