Smurfit Kappa Group Acquires Orange County Container Group

The Irish company Smurfit Kappa Group (SKG) has announced plans to acquire Orange County Container Group (OCCG) , headquartered in Forney, Texas, for $340 million.

OCCG, which employs 2,800 people, is a privately owned corrugated and containerboard manufacturer with operations in northern Mexico and the U.S. Southwest. The deal is expected to be complete by 2012’s fourth quarter.

Gary McGann, Smurfit Kappa Group CEO, says, "We are pleased to announce our agreement to acquire Orange County Container Group. We look forward to welcoming the excellent team from OCCG into the Smurfit Kappa Group and we are confident that their skills and expertise will complement those of our colleagues in the relevant markets.”

McGann notes that the continued strength of the company’s operating performance and consequent net debt reduction has increased the range of strategic and financial options for the SKG.

"The acquisition of OCCG provides a complementary portfolio of well-invested assets and quality people," he says. "The transaction further increases the contribution of SKG’s existing Latin American business; providing the company with a very significant position within the key Maquiladora trading region and substantially strengthening our position in the higher growth Mexican market."

OCCG’s assets include:

• Eight packaging facilities in Mexico comprising two box plants, three sheet plants and three fulfillment centers;
• Seven distribution centers in Mexico;
• 2,800 employees (2,000 in Mexico; 800 in the United States);
• Two packaging facilities in the southern United States comprising one box and one sheet plant;
• A 290,000-metric-ton recycled containerboard mill in the southern United States; and
• Seven wholly owned recycling centers in Texas, Oklahoma and Arkansas.

In a statement following the announcement, SKG says the transaction is strategically and financially attractive because OCCG strengthens SKG’s position in Mexico and gives SKG a small position in an increasingly consolidated U.S. market.

SKG also says the acquisition will allow the company to transfer some of its European recycled containerboard and corrugated innovation and production experience to OCCG’s mill and corrugated operations.

With the acquisition, SKG says it has increased its control of a significant tonnage of recovered fiber, helping to strengthen the supply of raw material, ensuring a stable source of paper to supply its expanding Mexican packaging business.

SKG says the acquistion will strengthen its position in higher growth markets as well as:

• Increase its containerboard and corrugated business in Mexico to include three paper machines and nine box plants with containerboard production of about 295,000 metric tons and corrugated shipments of 500 million square meters for the 12 months to June 2012;
• Complement its Mexican business with limited customer or geographic overlap;
• Provides a pro-forma total market share of about 17 percent of the Mexican market; and
• Give the company enhanced geographic diversity, with SKG’s nonEuropean exposure expected to increase from 23 percent to 26 percent of SKG’s EBITDA.