Smurfit Kappa plans €600m bond issue

Packaging manufacturer Smurfit Kappa is borrowing €600 million from investors through a bond issue to pay for its purchase of Dutch rival Reparenco.

Smurfit recently announced that it planned to buy Netherlands-based paper company Reparenco for €460 million.

The group said on Monday that a subsidiary, Smurfit Kappa Acquisitions, intends offering €600 million worth of bonds with an interest rate of 2.875 per cent which will be due for repayment in 2026.

Smurfit will use some of the cash raised to pay for Reparenco, a mill with the capacity to produce 675,000 tonnes of paper and cardboard. The group says that its acquisition will earn €72 million this year.

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Placement

The Irish group will offer the bonds to investors via a private placement, which means that they will not be offered in public. The group plans to close the sale on Thursday June 28th.

Earlier this year, Smurfit revealed that it planned to spend €1.6 billion over the next four years on deals and investing in its own facilities.

Smurfit shares fell 1.94 per cent to €34.30 on the Irish Stock Exchange on Monday. The company announced the bond issue just before the market closed.

The group's value tumbled 9 per cent earlier this month shortly before US player International Paper dropped efforts to buy Smurfit citing lack of engagement by the Irish company's board.

Smurfit's board rejected two offers from International Paper, saying that the US company undervalued the Irish business, despite pressure from large shareholders including British asset manager Janus Henderson. which owns 4.3 per cent of the group.

Following International Paper's decision to walk away from a deal, Smurfit Kappa chief executive, Tony Smurfit, pledged to clarify the Irish manufacturers's strategy.

Shares

Mr Smurfit told Bloomberg TV that the group’s shares had been undervalued for some time and that “it’s for us now to make sure the market understands Smurfit Kappa better over the next while”.

When it announced the Reparenco deal, Smurfit pointed out that it was making good on a pledge to invest in further recycled paper manufacturing capacity in Europe.

Smurfit announced that it had agreed to buy Reparenco in May. The deal followed a process that began in February. Reparenco employs 315 people and has assets of €189 million.

Smurfit Kappa is one of the world’s biggest manufacturers of paper packaging with 365 factories in 35 countries in Europe and the Americas. It employs 46,000 people. Revenues last year were €8.6 billion.