US private equity firm Blackstone has launched a bid to take over struggling Norwegian paper manufacturer Norske Skog - a move which could impact its local paper mill operations in Australia and New Zealand.
Last December, Blackstone's GSO Capital Partners raised its stake in Norske Skog to 10.59% to become the biggest shareholder in the company. Blackstone Group has now informed the European Commission (EC) that it intends acquire indirect sole control of Norske Skog. The provisional deadline is set at 3 March 2016.
Norske Skog was forced to call an extraordinary general meeting in January after GSO Capital rejected a board plan to restructure the company's debt of €1 billion by asking holders of senior note loans to switch to new unsecured loans that mature at later dates, in a bid to strengthen its capital structure.
In a market update this week, Norske Skog reported improved cash flow and operating conditions and said the exchange offer had now been extended.
Norske Skog's gross operating earnings (EBITDA) in the fourth quarter of 2015 were NOK 260 million, up from NOK 163 million in the third quarter. The EBITDA improved from the third quarter due to higher sales volume and lower costs. Higher sales and release of working capital in the quarter resulted in a cash flow of NOK 363 million from operating activities before financial items. The exchange offer launched on 5 January has been extended to 26 February 2016.
“We are satisfied with higher sales, the improved cost and cash flow developments in the quarter, especially for the Norwegian units,” said Sven Ombudstvedt, President and CEO of Norske Skog. “The weakening of the Norwegian krone has improved the operations for the Norwegian units but has a negative effect on the net interest bearing debt.”
The company said operating revenue for its Australasian operation had also increased from the previous quarter with a combination of somewhat favourable pricing, sales volume and NOK depreciation.
Fixed costs declined due to a reversal of environmental provisions, but were negatively impacted by NOK depreciation. Gross operating earnings improved quarter-over-quarter with favourable capacity utilization and the one-off cost reduction. Demand for newsprint in Australasia decreased by around 9% in the first eleven months of the year compared to the same period last year, while demand for magazine paper was relatively stable.
The market balance for newsprint and magazine paper in Europe improved during the autumn of last year with the effects from capacity closures in the industry. This has led to high operating rates into 2016 and improved pricing across all publication paper grades. The domestic prices in Australasia are stable, while Asian newsprint prices have increased somewhat.
Norske Skog has two mills in Australia – at Boyer in Tasmania and Albury in NSW – and operates the Tasman mill at Kawerau in New Zealand.