The cash purchase price of $825m (£619m) corresponds to $27 per share and an enterprise value / adjusted EBITDA multiple of approximately 6x for the twelve months ending 30 September 2021.
The deal, which was unanimously approved by Verso’s board of directors, is expected to complete in Q2 of 2022, subject to shareholder and regulatory approval.
The announcement comes less than two months after BillerudKorsnäs announced the divestment of its Beetham mill in Cumbria to investment firm Inspirit Capital.
In a statement issued on 20 December, the Swedish manufacturer said its acquisition of Verso was in line with its ambition to expand into North America and drive profitable growth in paperboard.
Listed on the New York Stock Exchange and headquartered in Miamisburg, Ohio, Verso has two paper mills in Michigan, a roll-to-sheet converting facility in Wisconsin and two distribution centres in Sauk Village, Illinois and Bedford, Pennsylvania.
With a 1,700-strong workforce, Verso has an annual paper production capacity of around 1.1m tonnes and posted net sales of $1.2bn for the 12 months to 30 September 2021, and adjusted EBITDA of $158m.
Combined net sales for BillerudKorsnäs and Verso for the twelve months to 30 September 2021 amount to approximately SEK36.7bn (£3.02bn) and combined adjusted EBITDA for the same period is approximately SEK5bn.
BillerudKorsnäs plans to transform Verso’s largest site, its Escanaba mill, into a paperboard production site by converting some of its machinery at an estimated capex of SEK9bn. It has two machines to be converted, with one planned for completion by 2025 and the second by 2029 with a combined capacity of 1.1m tonnes.
The company said that the increased net capacity of around 400,000 tonnes, together with a more profitable product mix, would create significant shareholder value over time.
Paper production would continue throughout the conversion period at the Escanaba Mill, it said, while BillerudKorsnäs plans to continue paper and market pulp production at the Quinnesec Mill, with an annual capacity of 400,000 and 200,000 tonnes respectively.
The statement said: “Verso’s strategic assets are positioned in a region with abundant and cost-effective fibre supply suitable for production of premium packaging materials. Verso’s location also presents favourable export opportunities to both Asia and Europe.
“Verso will become the platform for BillerudKorsnäs’ future expansion in North America and is expected to provide continuous growth opportunities over the next ten years and beyond. The combined company will be one of the largest providers of virgin fibre paper and packaging with a cost and quality advantage.”
Commenting on the acquisition president and chief executive of BillerudKorsnäs, Christoph Michalski, said: “The combination of BillerudKorsnäs’ expertise in high-quality virgin fibre packaging materials and Verso’s attractive assets creates an excellent platform for long-term profitable growth. We will obtain cost-effective production of coated virgin fibre material in the Midwestern United States.
“We also plan to sequentially transform part of the business into paperboard production while continuing to serve the US customers. Our investments will create new US-based jobs in a growing market and accelerate the transition from plastic-based packaging materials to renewable sources,” he added.
The acquisition and transformation will be financed through a combination of rights issue up to SEK3.5bn, a SEK6bn credit facility with Danske Bank and SEB, and operating cashflow. The credit facility is planned to be refinanced by issuance of debt instruments and an equity rights issue.
Following completion of the deal, BillerudKorsnäs plans to maintain its long-term financial targets of 3-4% annual net growth, an EBITDA margin greater than 17%, net debt / EBITDA less than 2.5x and dividends of greater than 50% of net profit.
Acquisition-related costs of around SEK135m will be reported in the fourth quarter results of 2021 as an item affecting comparability.
BillerudKorsnäs was founded in 2012 following a merger of Billerud and Korsnäs.
