Paperlinx looks to spark European market consolidation

Paperlinx has initiated a strategic review of its European, Asian (excluding Australia and New Zealand) and Canadian operations that will look at "all options" including acquistions, disposals and mergers.

Paperlinx chief executive Andrew Price said that the company was "trying to spark some sort of consolidation" in response to European market conditions, which he described as "in pretty serious decline".

"We haven't seen the upswing we hoped for, right across Europe. And what we're seeing is that we need to do things differently. We've had talks with all of the major paper groups across Europe – about mergers, about acquisitions, and about disposals – and all offers are on the table," added Price.

"We've got over 30 transactions in front of us at the moment, including current offers to buy all of our European business, to buy our businesses in various countries, or for us to acquire businesses from across the world.

"There are so many different business opportunities for us, so we've appointed Deloitte to conduct a strategic review and to formulate a plan that we can take forward."

The 90-day review will cover Paper Associates, which is the holding company for Paperlinx's European, Asian (excluding Australia and New Zealand) and Canadian operations.

Price said: "The definition of insanity is to keep doing the same thing and expect different results. In the paper industry we've all been doing the same thing and the results in the market are not pretty.

"We still have very good businesses in Australia, New Zealand and Canada and a lot of our business in Europe is getting better but it's not getting better fast enough and the market conditions are deteriorating. Some of the paper prices in Europe are at their lowest in living memory and that's because some of the new entrants to the supply chain have destroyed pricing."

In a statement to the stock exchange, Paperlinx said that over paper consumption in Europe had "fallen more than expected in the first half" and that strategic market moves by some suppliers and competitors were "causing further pressure on market pricing".

"Due to the structural issues in the European market, we expect these issues to continue until there is further industry restructuring and further reduction in capacity by the major mill groups," the company added.

In addition to Deloitte, Paperlinx has engaged global investment bank Moelis and Company. An update on the strategic review is expected before the end of March 2015.


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