Antalis poised to float as parent hit by $138m court claim

By Darryl Danielli, Monday 20 February 2017

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Antalis and Arjowiggins parent Sequana has lost the latest round of its long-running High Court battle with BAT Industries and has filed for temporary creditor protection in France while it looks to dispose of Arjo’s security paper operation and launch an IPO at merchanting arm Antalis.

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Hunter: flotation is not a knee-jerk reaction

The case, which was heard at the High Court in London, centres around contested dividends paid by Windward Prospects, formerly Arjowiggins Appleton, to Sequana in 2008 and 2009 when the latter owned the business. The dividends totalled €578m (£492m).

BAT Industries, a division of British American Tobacco (BAT), was attempting to recoup the dividends so that Windward could meet its obligations resulting from the $1bn clean-up operation following the pollution of two US rivers with chemicals used in paper production between the 1950s and 1970s.

Last summer, the court rejected BAT’s claim relating to the 2008 dividend (€443m/£377m), but accepted the claim on the €135m second dividend.

In its latest ruling, handed down on 10 February, the High Court of Justice ordered that Sequana initially pay BAT $138.4m (£111m) towards the clean-up, with the potential for an additional $5m. It also ordered that Sequana pay up to £9.6m of BAT’s legal costs.

Sequana plans to appeal the latest ruling, a process that could take 12-18 months before a final verdict is delivered.

However, because the current ruling, represents “an important risk for the group” Sequana will seek the protection of the French Commercial Court under ‘Sauvegarde’. It stressed that this only affects Sequana – as the court ruling “does not create any direct liabilities” for Antalis or Arjowiggins.

Securing the protection of the French Court will enable the company to complete its strategic restructuring plan, much of which has been in motion for a number of months.

The division is already in advanced talks to sell Arjowiggins Security BV to Oberthur Fiduciaire, which could generate up to €30m.

It has also proposed an Initial Public Offering of a minority stake in Antalis on the Paris Stock Exchange. Work on the IPO began at the start of the year. Sequana will remain the majority shareholder in the business post IPO.

“It’s a complex time at the moment, but underneath it all we’re excited that at the end of it we’ll be a standalone, quoted company,” said David Hunter, Antalis regional managing director for UK, Ireland and South Africa.

“In some respects the timing of the various announcements is coincidental. It’s not a knee-jerk reaction, it’s something that has been planned and discussed for some time.”

Sequana plans to complete both the sale of the remainder of the struggling Arjowiggins Security Division and the Antalis IPO in the first half of 2017.

As a result, the group hopes to exit Sauvegarde by early May.

“This is not a company that is losing money, the underlying businesses are profitable – it’s purely a technical protection for Sequana while it undertakes these [restructuring] activities,” said Hunter.

Sequana has simultaneously released its unaudited full-year results to 31 December 2016.
Sales at the group’s continuing operations slipped by 7% to €2.9bn, but EBITDA was static at €105m (2015: €106m).

Sales at Arjowiggins were down 11.7% to €668m in the same period.

Antalis sales were down 6.3% year-on-year to €2.5bn, which the company blamed on unfavourable exchange rates with the pound and a drop in paper volumes, but it said this was partially offset by a strong performance in its Packaging and Visual Communications divisions. EBITDA was down to €88m from €94m.

Hunter said that the Antalis UK had put in a strong performance in 2016.

“2015 was a record year for us, and '16 will continue in a similar vein – it will be a different shape to 2015, but will be a decent year nonetheless and we continue to make good profits."

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