Paperboard manufacturer Stora Enso has signed an agreement to establish a joint venture called Bulleh Shah Packaging (Private) with Pakistan-based paper firm Packages
Stora Enso said that its initial shareholding will be 35% with a commitment to increase the shareholding at the agreed value to 50% at a later stage subject to certain conditions being met. The joint venture will include the operations of the Kasur mill and Karachi plant currently owned by Packages.
According to Stora Enso, the joint venture will to a large extent provide packaging products to key local and international customers in the fast-growing Pakistani market. The joint venture will employ about 950 people and its sales are forecast to be $130m (€99m) in 2012.
The agreed value for 100% of the joint-venture company is approximately $108m (€83 million) on a cash and debt free basis. The total consideration can be up to $125m (€96m), including an additional maximum performance compensation based on the financial results of the second half of
2012 and the first half of 2013.
As part of the agreement, both parties are committed to a substantial $135m (€103m) investment programme during 2013 and 2014 to develop the business further. The joint venture is EPS accretive and will over time after the new investments exceed Stora Enso's ROCE target of 13%.
"This is an example of Stora Enso's investments in value-creating growth markets. The Pakistani market, with growing demand for packaging products and paperboard, offers an attractive growth opportunity for us and the joint venture will enable us to increase our capability to serve our key customers," said Stora Enso Renewable Packaging Business Area ?executive vice president Mats Nordlander.
The joint-venture transaction is expected to be completed during the first quarter of 2013, subject to competition and regulatory approval and other customary transaction conditions.
