SCA complements its US tissue operations
SCA has acquired the US tissue company Encore Paper Company Inc. at a
price of USD 92 M (approximately SEK 930 M) on a debt-free basis. The
company, which is integrated, has an annual converting capacity of about
6 million cases of Away-From-Home (AFH) tissue products. The paper
capacity amounts to 85,000 short tons per year, exceeding the converting
capacity with approximately 15.000 short tons. More than half of the
company's sales is attributable to the towel product segment. Encore's
products are sold primarily in the Midwest, northeastern and
southeastern US. The acquisition complements SCA's current tissue
operations in the US through a more balanced product mix, improved paper
balance and logistics.
The addition of towel products complements SCA's current product mix,
which today predominantly comprises napkins. Logistics are improved
through converting being coordinated between SCA's and Encore's units.
Concurrently, Encore's paper production can be used directly by SCA's
nearby converting plants in northeastern US, while Encore's product
offering in other regions of the US will be incorporated into SCA's
The acquisition price corresponds to 5.1 times operating surplus
(EBITDA), based on earnings in the most recent 12 months. Encore has
shown an average operating surplus margin of slightly more than 19% over
the past five years, with an average annual sales growth of 10%. The
acquisition is expected to result in a CVA index of about 1.6, exceeding
SCA's weighted average cost of capital (WACC) by 60%. The acquired
business is expected to contribute SEK 0.20 to SCA's earnings per share
in the first 12 months.
Earlier this year SCA acquired Georgia-Pacific Corporation's AFH
operations in the US. Through the acquisition, SCA achieved national
market coverage and a 17% market share, which gave SCA a position as the
third-largest supplier. With the acquisition of Encore, SCA is
increasing its total market share to 19%. Encore has annual sales of
approximately USD 85 M (SEK 860 M), with about 350 employees. The
operations was taken over by SCA as of 20 November 2001.
In conjunction with the acquisition, Encore's president, Joe Raccuia,
will assume a new position as Chief Operating Officer in SCA's total
North America tissue business.
Stockholm, 21 November 2001
SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ)
Communications and Investor Relations
For additional information, contact:
Sverker Martin-Löf, President and CEO. +46 8 788 51 51
Peter Nyquist, Vice President, Communications and Investor Relations.
+46 8 788 52 34
This information was brought to you by Waymaker http://www.waymaker.net
The following files are available for download: