Mondi CEO Andrew King is confident the company’s acquisition of several Schumacher Packaging assets will lead to a quick boost in earnings, more corrugated converting capacity and an expansion of its e-commerce offering.
The UK and JSE-listed paper and packaging group on Wednesday said it would buy Schumacher’s German, Benelux and UK corrugated converting and solid board operations. Mondi didn’t disclose the price, but said the assets have an enterprise value of €634m (R12.2bn) and would be financed from existing facilities.
The market welcomed the news with Mondi’s share price gaining almost 5% to R340.10, though the stock is down 15% so far this year.
King said the acquisition was not only in line with Mondi’s strategy for the corrugated business — which is centred on expanding in its core markets in Europe and investing in cost-advantaged assets — but would also add more than 1-billion square metres to the group’s corrugated conversion capacity when fully operational.
The acquired assets comprise seven corrugated plants in Germany, the Netherlands, and the UK. This includes two “cutting-edge, economically advantageous” mega box factories in Germany, Ebersdorf and Greven.
The Greven site and other plants recently benefited from a large investment programme that significantly increased capacity, offering substantial cost and quality advantages due to the large economies of scale and use of the latest technology.
Mondi has also bought an integrated niche solid board business comprising two mills and four converting plants, all in Germany.
King said these plants, which complemented Mondi’s existing network of corrugated plants across Central and Eastern Europe, were “high-quality assets with a skilled workforce, a great customer base, and a culture that’s very much aligned to our own”.
“It strengthens our corrugated converting footprint in Western Europe with assets that are highly complementary,” he said. “Both broadening our geographic coverage into North-western Germany, Benelux and the UK, and also offering optimisation opportunities with our existing strength in southeastern Germany, Austria, the Czech Republic, and Poland.”
Mondi said in a statement the acquisitions will expand its corrugated footprint in Western Europe and add complementary fibre-based products, focused on e-commerce and FMCG (fast-moving consumer goods).
Expanding Mondi's e-commerce offering — particularly in Germany, the largest packaging market in Europe — presents good opportunities to introduce the group products to more customers as they increasingly transition towards more sustainable packaging.
“Schumacher’s solid-board offering complements our range of sustainable packaging solutions, serving a very similar customer base”, especially for the packing of goods traded via e-commerce, King said.
“We’ll be able to offer our customers a full suite of products from across our corrugated and flexibles business, with the Schumacher solid board envelopes adding to this unique offering, which stretches, as I say, already from our corrugated boxes and envelopes to protective mailers and mailer bags.”
CFO Mike Powell said the Schumacher assets delivered adjusted earnings before interest, tax, depreciation and amortisation (ebitda) of €66m in 2023, and €22m in cost synergies were expected to be realised by the end of the third year. He said this would cover areas such as procurement, cost optimisation, and vertical integration. Powell added that the cash cost to achieve these synergies was about €18m.
The assets would be value accretive in the first full-year of ownership and “strongly accretive thereafter” as though the volumes ramp up and the synergies were realised in full.
The transaction, which is subject to certain customary regulatory approvals, is expected to close in the first half of 2025.
Bjoern Schumacher and Hendrik Schumacher, co-CEOs of Schumacher Packaging, who have been instrumental in the development of the business over many years, will be retained as strategic adviser and as COO of Solid Board, respectively.
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