Category: Japan

Japan’s Oji Paper has entered into exclusive talks to purchase the $313m in assets that Brazil’s Fibria put on the block this year. The two could finalize a deal for the real estate and plant assets that make up Fibria’s Piracicaba unit as soon as September 29, marking the last of its non-core assets to go as part of a long-term deleveraging plan. “This asset sale does not affect its main [pulp and forestry] business, and will help reduce debt,” says a Sao Paulo-based analyst who covers the sector. As Fibria had announced in July discussions with several buyers, it likely is getting a good price and a valuation roughly in line with expectations, the analyst says. Goldman Sachs is advising Fibria in the sale. The Piracicaba facility produces heat-sensitive, self-copying and couche paper, at a 160,000 ton per year capacity. The pulp maker was formed after the merger of VCP and Aracruz in 2008 and it is now focusing on reducing leverage to its target 2.0-2.5x range, from the 3.2x net debt/Ebitda for the 12 months to June 30. Fibria is constantly taking out new refinancing instruments to reduce service costs, including an $800m loan and $750m 2021 bond this year. The company has previously indicated that in addition to the sale of non-core assets, options to monetize strategic pulp assets – such as leasing them or other arrangements that do not involve ceding control – would not be ruled out. Fibria is rated BB+/Ba1/BB. Oji is one of the world’s largest paper manufacturers and is on 5 continents. It already has forestry, manufacturing and sales operations in Brazil, through its 40% stake in Cenibra.

Kirin’s BRL3.95bn ($2.52bn) purchase of a 50.45% stake in Brazilian brewer Schincariol is seen as expensive, but the Japanese acquirer was prepared to pay more than competing bidders as it looks to gain a foothold in Brazil’s high-growth market, analysts say. Although valuations are difficult to calculate independently as Schincariol is private, the acquirer says the deal represents a 15.7x EV/Ebitda price over the 12 months to March 2011. The bid was significantly higher than the value Heineken and SABMiller had put on the asset when they were heard submitting respective bids of BRL2.2bn and BRL1.8bn. But, according to one analyst, such behavior is typical of Japanese acquirers looking to gain exposure to new markets. “It sounds a lot more expensive,” than other deals in the sector, says one Sao Paulo-based equity analyst. AnBev, for example, has an implied EV/Ebitda of around 14x. Meanwhile, by purchasing Schincariol, Heineken and SABMiller could have taken advantage of synergies that simply don’t exist for the Japanese brewer, but both appeared unwilling to match Kirin’s price. In theory, Kirin could reduce the cost of the deal by buying the remaining 49.55% stake from the minority shareholders at a lower multiple, though this seems unlikely given such sellers are already protesting the purchase (See ‘Schin Shareholders Sue to Stop Sale’). Despite expectations to the contrary, the purchase is unlikely to have a major impact on the Brazilian beer and beverage market. It may have been a different story if SAB Miller or Heineken had made the acquisition and taken a major lead over competitors, but a newcomer like Kirin is unlikely to upset the existing dynamics of the market. “I don’t think it really changes anything,” says one equity analyst. That said, the deal now leaves Petropolis as the only major independent brewery in Brazil, should other players want to consolidate their position. Heineken, for example, could choose to take it over now that Schincariol is of

Schincariol Shareholders Sue to Stop Sale
Minority shareholders at Brazilian brewer Schincariol filed suit Tuesday to halt the sale of the 50.45% stake held by their cousins Alexandre and Adriano to Japanese brewery Kirin for BRL3.95bn ($2.52bn). Jose Augusto Schincariol, Daniela Schincariol and Gilberto Schincariol Junior, cousins of the two brothers and holders of the remaining 49.55% stake in Schincariol, are claiming right of first refusal on the basis of the company’s bylaws. This is according to Larissa Teixera Quattrini, head of corporate issues at law firm Teixeira, Martins & Advogados, which has been retained by the minority holders. However, this argument is open to debate as Kirin acquired the holding company not the opco, which is the entity that is named in the change of control clause and entitles the minority shareholders the right of first refusal. The holding company, which was bought in its entirety by Kirin, holds 50.45% of the outstanding shares of Schincariol. Teixera says the minority shareholders were excluded from negotiations between the majority shareholders and Kirin despite having informed the buyers about the relevant bylaw. “The minority shareholders have absolutely no details about how the deal took place,” she says. “There have been many precedents that corporate documents have to be observed.” A judge’s decision on whether to allow the deal to continue is expected within the next several days. The minority holders were themselves heard interested in acquiring the rest of Schincariol and had retained Morgan Stanley to advise them, but were thought to lack the financing. Kirin was unavailable for comment at press time.