Interesting developments in the ownership of paper mills

Written by Lasse Krogell, NOPA

Over the last few weeks we have read about Sappi selling its graphic paper mills in Europe and about Stora Enso selling its German Maxau mill. The interesting fact is that in both these cases the announced buyer is not a company earlier active in the paper industry. Stora Enso also announced in September the sale of the Nymölla mill, producing wood free office papers, to USA headquartered Sylvano, a company in the paper industry.

The Maxau mill has an annual production of 530,000 tonnes of SC paper. The buyer is the Schwartz Group, a family business and the owner of Lidl and Kaufland. The group has a subsidiary, Schwartz Productions under which the Maxau mill will be operating. The main products of the production company has been; mineral water, chocolate and snacks, bakery products, ice cream and coffee. Obviously bulk products sold in their stores. Schwartz confirms that one of the main reasons to buy the paper mill is to secure the supply chain. This signals the importance of the door drops for Lidl and Kaufland. They also point out the importance of securing the supply of ”environmentally acceptable and ecologically sustainable paper”.

The Anjala and Hylte mills are still to be sold by Stora Enso. Anjala is specialized in improved uncoated mechanical paper grades mainly for books and Hylte is making mainly standard newsprint. Could it be that a group of newspaper and book publishers could join forces and follow the example of Schwarz and secure their supply chain by buying these mills? That would be a surprise to me, but so was also the two newcomers Aurelius and Schwarz.

The even bigger announcement was the agreement between Sappi and a Luxemburg registered investment company Aurelius Group, where Sappi is to sell the Maastricht Mill in the Netherlands, the Stockstadt Mill in Germany and the Kirkniemi Mill in Finland. With this Sappi signals its strategy to leave the graphic paper segment and concentrate on packaging and speciality papers, pulp and biomaterials.

Earlier in August it was announced that Aurelius is in the process of acquiring Agfa Offset Solutions, the provider of offset plates, CTP systems, workflow software and some other products to the printing industry. I looked at the portfolio of Aurelius Group. There are a diverse spectrum of businesses, among them; Scholl, comfort shoes, Hanse, worlds 2nd largest producer of sailing yachts, Silvian, do it yourself retail chain in Denmark, nds, automotive spare parts reseller in Norway and European Imaging Group, photo and video equipment reseller group. They have also investments in the chemical and building industries.

In the press release Aurelius founding partner Dirk Markus said: “The market for pulp and paper products is of particular interest to Aurelius considering our industrial sector expertise.”

“We combine a proven track record in complex carve-outs with a deep understanding of how to identify and unlock value creation potential. Given these key traits, this transaction offers ample opportunity to unleash the full potential of these production sites.”

On their web pages Aurelius says they have a long-term investment horizon. They are looking for companies with growth potential, below-average profitability and synergies to existing investments. It will be really interesting to see if Aurelius can bring new fresh ideas to the traditional paper manufacturing industry. Ideas that could also bring something new to the printing industry.

These two announcements are really a clear signal that times are changing. Could this be a new trend? For years we have seen mainly mergers where smaller companies have been acquired by stronger players. Even the name UPM, United Paper Mills, tells this story. Lately there was a period of closures that lead to a clear shortage of paper and huge price increases of paper. Surely also the energy price and the price of raw materials for paper manufacturing is playing a strong role in this development.

Hope to see you at the NOPA meeting in Copenhagen!