Klabin acquires International Paper assets in Brazil

Klabin acquires International Paper assets in Brazil

M&A Equity Brazil US Latin America

Brazilian paper company Klabin said on Sunday that it agreed to buy International Paper's local corrugated packaging business for BRL330 million ($63.9 million), equal to four times EBITDA.

Klabin will spend BRL280 million upon closing the deal and pay the additional BRL50 million a year later, "subject to certain adjustments," it said in a securities filing.

"The company will use its own resources for the payment and the impact on its leverage ratio will be immaterial," Klabin said about how it is going to pay for the deal.

Klabin had BRL9.73 billion in cash and BRL14.4 billion in net debt at the end of last year. It took out a four-year revolving credit line for $500 million at 135 basis points over Libor early this year, giving it BRL11.7 billion in liquidity at the end of last year, according to its financial results from the fourth quarter of 2019.

Klabin said it plans to record BRL105 million in synergies from the transaction by January 22. The deal is still subject to approval from Brazil's antitrust agency CADE, it added.

In October 2016, Klabin when agreed to spend BRL187 million for two local packaging businesses, Embalplan and Hevi, it spent $2,850 per tonne in production capacity. In the International Paper deal, however, it agreed to invest $1,100 per tonne, according to a presentation posted on Klabin's website.

Klabin has a market share of 17.3% in Brazil's corrugated boxes market, while International Paper has 6.6%, according to the presentation.

International Paper's corrugated packaging facilities in Brazil include three containerboard mills and four box plants. The US company said in a separate statement that it expects to close the transaction in the second half of the year as it continues to operate its paper and forestry businesses in Brazil.